Annual Report 2015 - SEARLE Companysearlecompany.com/.../themes/searle/downloads/Annual-Report-2015.… · Annual Report 2015 Research in the ... consolidated financial statements

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Research in the service of mankind

Annual Report

2015The Searle Company Limited

What’s in store for the future of industrial bioprocessing for medical therapies, which involves the use of living organisms or cells to create drugs or other agents? Will the batch or continuous bioprocessing platform dominate bio manufacturing of human therapeutics down the road? These are the questions about developments in biotechnology and bioengineering. We are sharing some of the facts and progress in the field as a theme of our annual report this year. With our own biotechnology plant, working towards actual production, we feel proud to be part of the future of medicine.

The Searle Company Limited

Vision and mission 02

Values 04

Company information 08

Notice of 50th annual general meeting 10

Directors’ report 16

Statement of compliance 36

Auditors’ review report on statement of compliance with best practices of corporate governance 38

Auditors’ report to the members on consolidated financial statements 39

Consolidated balance sheet 40

Consolidated profit and loss account 41

Consolidated statement of comprehensive income 42

Consolidated statement of cash flows 43

Consolidated statement of changes in equity 44

Notes to the consolidated financial statements 45

Unconsolidated financial statements 97

Contents

Our VisionTo lead in improving the quality of human life.

Our MissionWhich provides its customers with the best possible products and services in the Healthcare and Consumer Industry.

That is ever evolving in-step with the changing market place to maintain its leadership role.

Which is a responsible corporate citizen contributing to society and protecting the environment.

That promotes team spirit amongst its employees whilst maintaining their individuality, in a culture where people are encouraged to think and strive to achieve their true potential.

Which cares for its employees and shares in their dreams.

Which works today for a better and secure tomorrow for all its stake holders through innovation, new product development and sound business practices.

Which would grow and live beyond each one of us.

Our Values

Innovation and dedication:

• In all spheres of activity. Serving the needs of our customers with passion, dedication & by honoring our words.

Profitability:

• Enhancing shareholder value through long-term profitability and improving performance ratios.

Corporate Social Responsibility:

• To enrich our work environment with high levels of performance, participation & creativity and supporting society for healthy environment.

Seeking Allah’s pleasure in all that we do.

Recognition and Rewards:

• For high performing and meritorious employees. Sense of Urgency: to drive each individual to achieve company’s objectives.

Integrity:

• In all our dealings

Respect:

• For our customers and each other

Morethan325millionpatientshavebenefitedfromapproved medicines manufactured through biotechnology and gene technology to treat or Prevent heart attacks, stroke,multiplesclerosis,breastcancer,cysticfibrosis,leukemia, hepatitis, diabetes and other diseases.


Board of DirectorsMr. Adnan Asdar Ali Chairman Mr. Rashid Abdulla Chief Executive Officer Mr. Husain LawaiMr. S. Nadeem Ahmed Managing DirectorMr. Zubair Palwala Mr. Ayaz AbdullaMr. Asad AbdullaMr. Shahid AbdullahMrs. Faiza Naeem

Board of Audit CommitteeMr. Husain Lawai Chairman Mr. S. Nadeem Ahmed Mr. Asad Abdulla Board of HR & Remuneration Committee Mr. Asad Abdulla Chairman Mr. Rashid AbdullaMr. Ayaz Abdulla

Chief Financial OfficerMr. Mobeen Alam

Company SecretaryMr. Zubair Palwala

AuditorsGrant Thornton Anjum Rahman Legal AdvisorsMohsin Tayebaly & Co.

Bankers• StandardCharteredBank(Pakistan)Limited• HabibBankLimited• HabibMetropolitanBankLimited• NationalBankofPakistan• FaysalBankLimited • TheBankofPunjab• SoneriBankLimited• CitibankN.A.• DubaiIslamicBankPakistanLimited• AlbarakaBank(Pakistan)Limited Registered OfficeFirstFloor,N.I.C.Building,AbbasiShaheedRoad,Off: Shahrah-e-Faisal, Karachi.

Share RegistrarCentralDepositoryCompanyofPakistanLimitedHeadOffice,CDCHouse,99-B,Block‘B’S.M.C.H.S. Main Shahrah-e-FaisalKarachi - 74400

Company Information

Notice Of Annual General MeetingNotice is hereby given that the 50th annual general meeting of the shareholders of The Searle Company Limited will be held on Thursday, October 29, 2015 at 04:30 p.m. at the Institute of Chartered Accountants of Pakistan, Clifton, Karachi to transact the following business:

Ordinary Business

1. To confirm the minutes of annual general meeting held on October 24, 2014.

2. To receive, consider and adopt the audited financial statements for the year ended June 30, 2015 together with the directors’ and auditors’ reports thereon.

3. To consider and approve final cash dividend for the financial year ended June 30, 2015, at the rate of Rs.2/- per share of Rs.10/- each, equivalent to 20%, as recommended by the board of directors.

4. To appoint auditors for the year ending June 30, 2016 and to fix their remuneration. The present auditors, Grant Thornton Anjum Rahman, Chartered Accountants being eligible, have offered themselves for re-appointment.

Special Business

5. To approve the issue of bonus shares in the ratio of 20 shares for every 100 shares held i.e. 20% as recommended by the board of directors and, if thought appropriate, to passwithorwithoutmodification(s)thefollowingresolutionsas ordinary resolution:

“RESOLVED that a sum of PKR 171,681,490/- out of the un-appropriated profits of the Company be capitalized and applied towards the issue of 17,168,149 ordinary shares of Rs.10/- each and allotted as fully paid bonus

shares to the members who are registered in the books of the Company as at the close of business on October 22, 2015, in the proportion of twenty shares for every hundred ordinary shares held and that such new shares shall rank pari passu with the existing ordinary shares.

FURTHER RESOLVED that in the event of any member becoming entitled to a fraction of a share, the Directors be and are hereby authorised to consolidate all such fractions and sell the shares so constituted on the Stock Market and to pay the proceeds of the sale when realized to a recognized charitable institution as may be selected by the Directors of the Company.

FURTHER RESOLVED that the Company Secretary be and is hereby authorized to take all necessary actions on behalf of the Company for allotment and distribution of the said bonus shares as he think fit.”

Other Business

6. To transact any other ordinary business of the Company with the permission of the Chair.

ByorderoftheBoard

Zubair PalwalaKarachi: October 8, 2015 Company Secretary

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Statement of material facts under section 160(1)(b) of the Companies Ordinance, 1984 regarding the Special Business

Item 5

The Directors of the Company are of the view that the Company’sfinancialpositionjustifiesissuanceofbonussharesin the ratio of twenty shares for every hundred shares held.

The Directors are interested in the business to the extent of the entitlement of bonus shares as shareholders.

Notes:

A. Right issue and Book closure:

i) The Board of Directors of the Company in theirmeeting held on 30th September 2015 has declared 10% right shares (10 shares for every 100 sharesheld)at Rs.200per share (includingapremiumofRs.190pershare)toallthememberswhosenameswill appear on the Company’s register of members at the close of business on October 22, 2015.

ii) The share transfer books will remain closed from October23,2015toOctober29,2015(bothdaysinclusive)forentitlementof20%finalcashdividend,20% bonus shares and 10% right issue. Transfers in goodorder, receivedat theofficeofCompany’sShare Registrar, Central Depository Company of Pakistan Limited,CDCHouse, 99 – B, Block ‘B’,S.M.C.H.S., Main Shahra-e-Faisal, Karachi-74400 by close of the business on October 22, 2015 will be treated in time for the purpose of attending the annual general meeting and entitlement of cash dividend, stock dividend and right share.

iii) All members/shareholders are entitled to attend, speak and vote at the annual general meeting. A member/shareholder may appoint a proxy to attend, speak and vote on his/her behalf. The proxy need not be a member of the Company. Proxies in order to be effective must be received by the Company’s RegisteredOffice: First Floor, NIC Building, AbbasiShaheed Road, Karachi – 75530 not less than 48 hours before the meeting.

iv) In pursuance of Circular No. 1. of 2000 of SECP datedJanuary26,2000thebeneficialownersoftheshares registered in the name of Central Depository Company(CDC)and/or theirproxiesare requiredto produce their Computerized National Identity Card(CNIC)orpassportforidentificationpurpose

at the time of attending the meeting. The form of proxy must be submitted with the Company within the stipulated time, duly witnessed by two persons whose names, addresses and CNIC numbers must be mentioned on the form, along with attested copiesoftheCNICorthepassportofthebeneficialowner and the proxy.

Incaseofcorporateentity,theBoardofDirectors’resolution/power of attorney with specimen signature of the nominee shall be produced at the time of the meeting.

Iv Members are requested to intimate any changes in address immediately to Company’s Share Registrar, Central Depository Company of Pakistan Limited, CDC House, 99 – B, Block ‘B’, S.M.C.H.S., MainShahra-e-Faisal, Karachi-74400.

B. Submission of copy of CNIC (Mandatory):

InaccordancewiththenotificationoftheSecuritiesandExchange Commission of Pakistan (SECP) S.R.O. 779(i)2011 dated August 18, 2011 dividend, warrants should bear Computerized National Identity Card (CNIC)number of the registered who have not yet submitted copy of their valid CNIC or National Tax Number (incase of corporate entities) are requested to submitthe same to the Company’s Share Registrar, Central Depository Company of Pakistan Limited, with members’ Folio number(s)/Participant ID CDS Account number(s)mentioned thereon, before book closure date. It may kindly be noted that in case of non-receipt of the copy of valid CNIC, the Company would be constrained to withhold dispatch of dividend warrants.

C. Revision of withholding tax on dividend income under section 150 of Finance Act 2014:

It is further informed that pursuant to the provisions of Finance Act 2015, effective from July 1, 2015 a new criteria for withholding tax on dividend income has been introducedbyFederalBoardofRevenue(FBR),as“Filer”and “Non-Filer” shareholders and withholding tax @12.50% and 17.50% respectively.

Shareholders are therefore advised to check and ensure theirFilerstatusfromActiveTaxPayerList(ATL)availableatFBRwebsitehttp://www.fbr.com.gov.pkaswellasensurethat their CNIC/Passport number has been recorded by their Participant/Investor Account Services (in caseshareholding is in book entry form) or by Company’sShare Registrar, Central Depository Company of Pakistan Limited (in case of physical shareholding). Corporate

A n n u a l R e p o r t 2 0 1 5 11

bodies(non-Individualshareholders)shouldensurethattheirnamesandNTNareavailableinATLatFBRwebsiteand recorded by Participant/Investor Account Services or by Company’s Share Registrar (in case of Physicalshareholding).

D. Dividend Mandate (Optional):

Under Section 250 of the Companies Ordinance, 1984 a shareholder may, if so desires, direct the Company to pay dividend through his/her/its bank account. In pursuance of the directions given by the Securities and Exchange Commission of Pakistan (SECP) vide circular

number 18 of 2012 dated June 5, 2012, shareholders may authorize the Company for direct credit of his/her/its cash dividend in his/her/its bank account (pleasenote that giving bank mandate for dividend payments is optional, in case shareholder do not wish to avail this facility his/her/its dividend will be paid through dividend warrant). If any shareholder wants to avail the facilityof direct credit of dividend amount in his/her/its bank account, provide following information to the Company’s Share Registrar, Central Depository Company of Pakistan Limited.

BankAccountDetailsofShareholder

TitleofBankAccount

BankAccountNumber

Bank’sName

Branchnameandaddress

Cell number of shareholder

Landline number of shareholder, if any

It is stated that the above-mentioned information is correct and in case of any change therein, I/we will immediately intimate to the Company and the concerned registrar.

Name, signature, folio # and CNIC number of shareholder

Notes:(1) Those shareholders, who hold shares in book entry form in their CDS accounts, will provide the above dividend

mandate information directly to their respective Participant/CDC Investor Account Services Department.

(2) If dividend mandate information has already been provided, please ignore this request.

E. Transmission of annual financial statements through email:

In pursuance of the directions given by the Securities and Exchange Commission of Pakistan (SECP) videSRO 787(1)/2014 dated September 8, 2014, thoseshareholders who desire to receive Annual Financial Statements in future through email instead of receiving the same by post are advised to give their formal consent along with their valid email address on a standard request form which is available at the end of this annual report and send the said form duly signed by the shareholder along with copy of his/her CNIC to the Company’s Share Registrar, Central Depository Company of Pakistan Limited. Please note that giving email address

for receiving of Annual Financial Statements instead of receiving the same by post is optional, shareholders, who do not wish to avail this facility, are requested to ignore this notice, Financial Statements will be sent to the shareholders at their registered address.

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Today, 418 new biotech medicines and vaccines are being tested for more than 100 diseases, among which 210 to treat cancer, 50 to treat infectious diseases and 44 to treat autoimmune disorders.


Health is a crucially important social and economic asset – a cornerstone for human development. We are working in every possible means to ensure that every single individual has access to adequate healthcare solutions in every given circumstance.

The year 2015, was yet again an outstanding year for the patients we serve and for our shareholders, one that clearly demonstrated how we will compete and succeed in the years ahead.

The Directors take pleasure in presenting the annual report together with the audited financial statements of the holding company for the year ended June 30, 2015.

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984. The Directors’ Report has been prepared in accordance with section 236 of the Companies Ordinance, 1984 and clause xvi of the Code of Corporate Governance 2012.

2015 2014PKR in thousand

Revenue 9,048,041 7,608,594

Gross profit 4,402,890 3,393,507

Gross profit percentage 48.6% 44.6%

Operating expenses 2,227,010 1,994,136

Operating expenses percentage 24.6% 26.2%

Operating profit 2,175,880 1,399,371

Operating profit percentage 24.0% 18.4%

Other income 98,382 117,670

Profit before taxation 1,908,819 1,165,879

Profit after taxation 1,452,391 876,057

Profit after taxation percentage 16.1% 11.5%

This report is to be submitted to the members at the 50th Annual General Meeting of the holding company to be held on October 29, 2015.

Operating results

We believe that the key to growth is the introduction of higher dimensions of consciousness into our awareness. Durable growth-and-income investment, delivering top-tier growth and steady margin expansion, with strong cash flow and increasing returns to shareholders is a concern of paramount importance to us.

During 2015, we made decisions and took actions that enabled us to allocate our resources in ways that enhanced shareholder value.

At the end of June 2015, the holding company reported revenue of 9.04 billion, corresponding to a growth of impressive 18.9% compared with the preceding year. The gross margins stood at 48.6% against 44.6% reported last year.

The double digit revenue growth is a result of domestic volume growth due to expanding doctor coverage coupled with the price increase made during the later part of the last year.

The operating cost as a percentage of revenue decreased to 24.6% from 26.2% reflecting tighter control over spendings.

Earnings per share

Basic earnings per share after taxation were Rs. 15.99 (2014:Rs.9.34).

There is no dilution effect on the basic earnings per share of the holding company, as the holding company has no convertible dilutive potential ordinary shares outstanding as at June 30, 2015.

Directors’ Report to the Shareholders

16

4.82 5.03

7.799.34

15.99

0

5

10

15

20

20152014201320122011

Dividend and Right Issue

The board of directors have recommended cash and stock dividend of 20%, for the year ended June 30, 2015, against the stock dividend of 40% in June 2014. Further, in addition, the board of directors have also recommended to offer 10% right shares at a premium of Rs.190 per share in proportion of 10 shares for every 100 shares held.

Financial statements and auditors

The financial statements of the holding company have been audited and approved without qualification by the auditors, Grant Thornton Anjum Rahman, Chartered Accountants [previously, Grant Thornton Anjum Asim Shahid Rahman, Chartered Accountants].

Further, the present auditors, Grant Thornton Anjum Rahman, Chartered Accountants, retired and being eligible, offer themselves for re-appointment. The Board of Directorsendorses recommendation of the Audit Committee for their re-appointment as Auditors of the holding company for the year ending June 30, 2016, at a fee to be mutually agreed.

Shareholding information

The holding Company’s shares are traded on the Karachi Stock Exchange and Islamabad Stock Exchange. The shareholding information as of June 30, 2015 and other related information is set out on pages 157 to 160 of the Financial Report. The Directors, CEO, Company Secretary and CFO, their spouses and minor children did not carry out any trade in the shares of the holding Company except the following:

NameShares

PurchasedShares

Disposed

Mrs. Shakila Rashid 294,000 291,500

Mr. Shahid Abdulla 139,900 -

Product innovation

We believe that, beyond innovation, we hold a wider

responsibility to ‘act vigilantly,’ by acting with integrity,complying with national laws, respecting human rights, applying fair labour norms, protecting the environment, and working against corruption to prevent harm to people, communities and future generations.

We are actively engaged in innovating products, so as to ensure a balanced business for the future, augmenting shareholders value and providing affordable healthcare solutions to the patients. The group is continuously exploring new ways of doing business through identification of new channels and geographies for business expansion and external alliances and partnerships.

Product quality

We believe, the main responsibility for ensuring public health does not only lie with governments and national institutions. We also have the duty to respect, protect and fulfill the right to health progressively, within every possible means. We should do our best to ensure availability, accessibility, acceptability and quality of health services – including reforming current healthcare systems to positively impact the health of the poor.

We are committed to our duty towards safeguarding the patient’s well-being, by assuring that all operations associated with the manufacture of a medicinal product are of a standard that assures the patient’s expectations of safety and efficacy. Our products carry a promise of Quality and we take issues related to the quality of our products very seriously.

Pharmaceutical industry is a vital segment of health care system bearing many inherent risks. In line with the above philosophy, we recognise that any mistake in product design or production can be severe, even fatal, therefore, the maintenance of quality with continuous improvement is our utmost priority and moral responsibility.

Corporate and social responsibility

Goodness is the only investment that never fails. Creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success.

At Searle, our aim has always been to make useful contributions to the economy we operate in. One of the primary areas of focus has been the creation of employment opportunities to support a large industrial and sales workforce. The group operates in a socially responsible manner. Accordingly, the CSR program has a very wide scope encompassing initiatives in the areas of healthcare, education, environment protection, water and sanitation, child welfare, infrastructure development and other social welfare activities.

Occupational health and safety

We believe, at the end of the day, the goals are simple, safety and security. All workers have the right to return home each

A n n u a l R e p o r t 2 0 1 5 17

day safe and sound. We at Searle, recognise the importance of safe and secure environment and consider it our duty to ensure that people who work for us know how to work safely and without risks to health and to develop a positive health and safety culture.

The health and safety of our employees and visitors is a matter of high priority for us. Therefore, hazards associated with operations are continuously identified, assessed and managed to eliminate or reduce risks.

Information technology

IIn line with our continuous endeavours to regularly upgrade information systems we continued with our policy to invest moreandmoreininformationtechnology(IT)andtoupgraderelated infrastructure, thereby continuously improving and enhancing both qualitative and quantitative aspects of management reporting including decision making processes.

The coming major investment which we have planned is the implementation of most powerful business management system ‘SAP’. The said investment is being carriedout to cater thegrowing business needs of the group.

Website

All our stakeholders and general public can visit our website, www.searlecompany.com, which has a dedicated section for investors containing information related to annual, half yearly and quarterly financial statements.

Related party transactions

All related party transactions, during the year 2015, were placed before the audit committee and the board for their review and approval. These transactions were duly approved by the Audit Committee and the Board in their respectivemeetings. All these transactions were in line with the transfer pricing methods and the policy with related parties approved by the board previously. The holding company also maintains a full record of all such transactions, along with the terms and conditions. For further details please refer note 42 to the consolidated financial statements.

Compliance with the Code of Corporate Governance

The stock exchanges have included in their Listing Rules, theCodeofCorporateGovernance (Code) issuedby theSecurities & Exchange Commission of Pakistan. The holding

company has adopted the code and is implementing the same in letter and spirit.

Directors’ training program

Boardofdirectors traininghelps theboard fulfil its roleandmake a real difference to a company’s performance. It takes a practical and pragmatic approach – because every board has a unique role in company oversight including duty to stakeholders. Therefore, keeping the same in mind and the requirements of the code two Directors namely Mr. Asad Abdulla and Mr. S. Nadeem Ahmed attended the directors’ training program conducted by Institute of Chartered Accountants of Pakistan during the year.

Code of conduct

TheBoardofDirectorsoftheholdingCompanyhasadopteda code of conduct. All employees are informed and aware of this and are required to observe these rules of conduct in relation to business and regulations.

Corporate and financial reporting framework

• The consolidated financial statements, prepared by the management of the holding Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

• Proper books of accounts of the holding Company have been maintained.

• Appropriate accounting policies have been consistently applied in preparation of the consolidated financial statements and accounting estimates are based on reasonable and prudent judgment.

• International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

• The holding Company maintains a sound internal control system which gives reasonable assurance against any material misstatement or loss. The internal control system is regularly reviewed.

• There are no significant doubts upon the holding Company’s ability to continue as a going concern.

• There has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations.


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• There has been no departure from the best practices of transfer pricing.

• The key operating and financial data for the six years is tabulated as follows:

2015 2014 2013 2012 2011 2010

ASSETS EMPLOYED

Property, plant and equipment 688,354 560,152 584,168 2,672,448 837,385 740,548

Intangible assets 39,845 47,782 74,071 86,570 104,352 69,445

Investment property 2,614,906 2,516,865 2,312,986 120,952 - -

Long-term investment 187,792 124,500 - - - -

Long-term loans, deposits & prepayments 100,300 2,476 7,212 7,273 7,953 7,872

Net current assets 2,397,902 1,342,194 1,030,267 580,193 1,181,693 988,979

Total assets employed 6,029,099 4,593,969 4,008,704 3,467,436 2,131,383 1,806,844

FINANCEDBY

Issued, subscribed and paid-up capital 858,407 613,148 471,652 336,895 306,268 306,268

Reserves and Unappropriated profit 3,842,263 2,800,929 2,221,285 1,703,731 1,393,115 1,051,237

Shareholder's equity 4,700,670 3,414,077 2,692,937 2,040,626 1,699,383 1,357,505

Non-controlling interest 318,627 260,847 201,428 176,119 146,818 124,060

Surplus on revaluation of fixed assets 296,961 168,163 185,020 201,589 179,901 207,484

Long-term and deferred liabilities 712,841 750,882 929,319 1,049,102 105,281 117,795

Total capital employed 6,029,099 4,593,969 4,008,704 3,467,436 2,131,383 1,806,844

Turnover 9,048,041 7,608,594 6,013,544 5,659,437 4,876,869 4,176,468

Profit before tax 1,908,819 1,165,879 981,603 620,703 563,397 557,427

Profit after tax 1,452,391 876,057 719,066 431,751 413,573 366,159

% of turnover 16.05 11.51 11.96 7.63 8.48 8.77

% of capital employed 24.09 19.07 17.94 12.45 19.40 20.27

Dividends

Cash (%) 20 - 35 35 40 30

Stock (%) 20 40 45 40 10 -

A n n u a l R e p o r t 2 0 1 5 19

Biotechnologyisalsoincreasinglyusedinhealthcare research, in combination with medical devices and surgical methods.


Audit committee

The Committee comprises of three non-executive directors. During the year, four meetings of audit committee were held, the details of which are as follows:

Name of director Meetings attended

Mr. Husain Lawai 3

Mr. Asad Abdulla 4

Mr. S. Nadeem Ahmed 4

Meetings of the board of directors

Duringtheyear,fivemeetingsoftheBoardofDirectorswereheld as follows:


Mr. Rashid Abdulla 5


Mr. Zubair Palwala 5

Mr. Munis Abdullah 2

Mr. Asad Abdulla 5

Mr. Ayaz Abdulla 5

Mr. Adnan Asdar Ali 4

Mr. Husain Lawai 4

Mrs. Faiza Naeem 4

During the year Mr. Shahid Abdulla was appointed on the board in place of Mr. Munis Abdulla, however, he did not attended any meeting.

Human resource and remuneration committee

The Committee comprises of following three members, two of them are non-executive Directors including the Chairman of the Committee.

Mr. Asad Abdulla - ChairmanMr. Rashid AbdullaMr. Ayaz Abdulla

Subsequent events

No material changes or commitments affecting the financial position of the holding Company have occurred between the end of the financial year of the holding Company and the date of this report.

Value of investments of provident funds

The value of investment of provident fund based on their un-audited / audited accounts as on June 30, 2015 and June 30, 2014 respectively was as follows:

2015 2014

PKR in thousand

Provident Fund 432,332 246,348

Future outlook

The future outlook of the market is pretty much bright owing to changing macroeconomic and socioeconomic indicators. The recent drive by authorities, to improve and tighten regulation on Pharmaceutical manufacturing and marketing, is expected to clean the market of many substandard and spurious drugs and in process improve the confidence of Physicians and Patients. In totality the market will gain its lost share and growth as many spurious drugs and counterfeit are being apprehended and substandard manufacturers being fined. Searle is regarded very high on its commitment to premium quality, unmatched efficacy and its Socially Responsible Stance evident by many of project heavily funded by Searle.

We are in almost all high-density therapeutic avenues such as Cardiovascular, Diabetes, Orthopedics, Neurology, and Pediatrics and are constantly increasing our presence in other therapeutic areas such as Antibiotics, Gastroenterology, Pulmonology, Virology and Oncology.

Developments in medical technology have long been confined to procedural or pharmaceutical advances, while neglecting a most basic and essential component of medicine: patient information management. Searle is also continuously developing and educating its sales force to ensure the same.

Support to different NGOs and contribution in unforeseen calamities will continue as a regular commitment to the nation of Pakistan.


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We must become bigger than we have been: more courageous, greater in spirit, larger in outlook. We are more confident than ever that Searle is well placed to succeed in emerging markets. Searle is planning to align with global trends including an ongoing population growth, rising demand of generic branded pharmaceuticals and nutritional products. Searle will aggressively focus on the global market and will primarily focus to expand the business operation in existing export countries while looking to penetrate into new countries as well.

The company sees huge potential for the infusion business therefore we are planning to expand its current production capacity and by diversification into a portfolio of IV sets and accessories.

Globally there is a significant shift in R&D from conventional pharmaceuticaltoBiotechnologyproduct.SoasinPakistan,we having a purpose built, FDA complaint state of art manufacturing facility in which we intent to produce biological

products for Oncology, Rheumatology, Nephrology & Virology for local & international markets.

When people are emotionally motivated, they contribute and same is the case with all our employees, partners, suppliers and customers, for which we are thankful and expect the same zeal and zest for their contribution in future.

For and on behalf of the board

Karachi: Rashid AbdullaSeptember 30, 2015 Chief Executive Officer

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Biotechmedicinesareestimatedtoaccountforapproximately 20% of all marketed medicines and represent 50% of all medicines in the pipeline.


Our Products

Our portfolio includes three major division; Pharma, Consumer Health and Nutrition. Pharmaceutical range across therapeutic areas such as Cardiovascular, Respiratory Care, Gastroenterology, Pain Management, CNS, Orthocare, Neuropsychiatry, Probiotics, Antibiotics and Nutritional Care.

SPL enjoys the category championship in wide range of products.

HYDRYLLINNo. 1 cough syrup for everyone

CO-OLESTAMorethan70%ofpatientsachievedtheirBPgoal

SELANZ SRSustained and fine one for nine

NUBEROL/NUBEROL FORTEA powerful and effective analgesic, muscle relaxant

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EZIUMMake life easy with Ezium - The

reliable and time tested PPI

ADRONILThe number one prescribed

Ibandronate in Pakistan

BYSCARD Thenovelβ-Blockerwithoutβ-Blockerlikeside effects

EXTOREffective way to control

blood pressure

LEVOXINLevoxin is the only quinolone approved by FDA for the treatment of 10 infections

A n n u a l R e p o r t 2 0 1 5 27

Increasingly, diagnostic test kits and diagnostic services are using biotech methods and reagents.


TEFNOInfection control is in your hand

XADINE Truly non-sedative anti-allergic

MORCETEffective way to manage anxiety

and depression

ZENBARFirst line management for diabetic

peripheral neuropathic pain

SPIROMIDENo. 1 cardio-protective

diuretic in Pakistan

NEZOLIDAn advanced solution for

gram-positive infections

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LUMARK Mark the change in epilepsy management

VENTEK Beinbettercontrol

ROTEC The NSAID with enhanced GI safety

TRAMAL - The Original TramadolNo. 1 non-narcotic pain

reliever in Pakistan

GRAVINATETrusted & time tested anti-emetic

SUSTACNo. 1 nitrate with sustained release

technology

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GUTCAREProtect moments naturally

LOMOTIL Leading Antidiarrheal

RHULEFAn effective DMARD for rheumatoid arthritis

XAROBANGo with the flow safely

RANCARD XRInnovative metabolic approach for the management of angina

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PEDITRALThe most trusted ORS of Pakistan

CANDERELSugar that suits everyone

SEARLE NUTRITIONWhere good health begins

VITRUMBestcombinationMulti-

Vitamin and Multi-Minerals

A n n u a l R e p o r t 2 0 1 5 33

Biotechnologyhasamajorimpactontheprovision of safe and effective vaccines against infectious diseases.


This statement is being presented to comply with the Code ofCorporateGovernance (CCG)contained inRegulationsof Karachi and Islamabad Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the CCG in the following manner:

1. The Company encourages representation of non-executive directors on its board of directors. At present the board includes:

Category Names Independent Directors : Mr. Husain LawaiExecutive Directors: Mr. Rashid Abdulla Mr. Zubair Palwala Mr. Ayaz Abdulla

Non-Executive Directors : Mr. Adnan Asdar Ali Mr. S. Nadeem Ahmed Mr. Asad Abdulla Mr. Shahid Abdullah Mrs. Faiza Naeem 2. The directors have confirmed that none of them is serving

as a director on more than seven listed companies, includingthiscompany(excludingthelistedsubsidiariesoflistedholdingcompanieswhereapplicable).

3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFIor,beingamemberofastockexchange,hasbeendeclared as a defaulter by that stock exchange.

4. CasualvacancyoccurredintheBoardduringtheyearwas filled within the prescribed time.

5. TheCompanyhasprepareda“CodeofConduct”andhas ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures.

6. The board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.

7. All the powers of the board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer, other executive and non-executive directors, have been taken by the board/shareholders.

8. The meetings of the board were presided over by the Chairman and, in his absence, by a director elected by the board for this purpose and the board met at least once in every quarter. Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. The board arranged training programs for its directors during the year.

10. The board has approved appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment.

11. The directors’ report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed.

12. The financial statements of the Company were duly endorsed by Chief Executive Officer and Chief Financial Officer before approval of the board.

13. The directors, Chief Executive Officer and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financial reporting requirements of the CCG.

15. The board has formed an Audit Committee. It comprises of three members, all are non-executive directors and the Chairman of the committee is an independent director.

16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the CCG. The terms of reference of the committee have been

Statement Of Compliance With The Code Of Corporate Governance

36

formed and advised to the committee for compliance.

17. The board has formed an HR and Remuneration Committee. It comprises of three members, two of them are non-executive directors including the Chairman of the committee.

18. The board has outsourced the internal audit function to BDO Ebrahim & Co., Chartered Accountants whoare considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company.

19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), that theyor any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC)guidelines on code of ethics as adopted by the ICAP.

20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing

regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.

21. The ‘closed period’, prior to the announcement ofinterim/final results, and business decisions, which may materially affect the market price of company’s securities, was determined and intimated to directors, employees and stock exchanges.

22. Material/price sensitive information has been disseminated among all market participants at once through stock exchanges.

23. We confirm that all other material principles enshrined in the CCG have been complied with.

Rashid AbdullaDated: September 30, 2015 Chief Executive Officer

A n n u a l R e p o r t 2 0 1 5 37

Review Report to the Members on Statement of Compliance of the Code of Corporate GovernanceWe have reviewed the enclosed Statement of Compliance (the Statement) with the best practices contained in the Code of Corporate Governance (the Code) for the year ended June 30, 2015 prepared by the board of directors of The Searle Company Limited (the Company) to comply with the requirements of Listing Regulation No. 35 Chapter XI of The Karachi Stock Exchange Limited and Islamabad Stock Exchange Limited, where the Company is listed.

The responsibility for compliance with the Code is that of the board of directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement reflects the status of the Company’s compliance with the provisions of the Code and report if it does not and to highlight any non-compliance with the requirements of the Code. A review is limited primarily to inquiries of the Company’s personnel and review of various documents prepared by the Company to comply with the Code.

As part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the board of directors’ statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures and risks.

The Code requires the Company to place before the audit committee, and upon recommendation of the audit committee, place before the board of directors for their review and approval its related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm’s length transactions and transactions which are not executed at arm’s length price and recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the board of directors upon recommendation of the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm’s length price or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not reflect the Company’s compliance, in all material respects, with the best practices contained in the Code as applicable to the Company for the year ended June 30, 2015.

Karachi. Grant Thornton Anjum RahmanDate: September 30, 2015 Chartered Accountants Khaliq-ur-Rahman

38

Independent Auditors’ Report on Consolidated Financial Statements to the MembersWe have audited the annexed consolidated financial statements comprising consolidated balance sheet of The Searle Company Limited (the Holding Company) and its subsidiary companies IBL HealthCare Limited, Searle Pharmaceuticals (Private) Limited, Searle Laboratories (Private) Limited and Searle Biosciences (Private) Limited (the subsidiaries) as at June 30, 2015 and the related consolidated profit and loss account, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion on the financial statements of the Holding Company and its subsidiary company IBL HealthCare Limited. Searle Pharmaceuticals (Private) Limited, Searle Laboratories (Private) Limited and Searle Biosciences (Private) Limited were audited by other firms of auditors whose reports have been furnished to us and our opinion, in so far as it relates to the amounts included for such companies are based solely on the report of such other auditors. These financial statements are the responsibility of the Holding Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements present fairly the financial position of the Holding Company and its subsidiary companies as at June 30, 2015 and the results of their operations for the year then ended.

Karachi. Grant Thornton Anjum RahmanDate: September 30, 2015 Chartered Accountants Khaliq-ur-Rahman

A n n u a l R e p o r t 2 0 1 5 39

Consolidated Balance Sheet As at June 30, 2015

Rashid Abdulla Chief Executive Officer

Syed Nadeem AhmedManaging Director

Note 2015 2014 --------- (Rupees in ‘000) ---------

ASSETS

Non-current assets Fixed assets - Property, plant and equipment 6 688,354 560,152 - Intangible assets 7 39,845 47,782

728,199 607,934 Investment properties 8 2,614,906 2,516,865 Long term investment 9 187,792 124,500 Long term loans 10 98,702 878 Long term deposits 11 1,598 1,598

Total non-current assets 3,631,197 3,251,775

Current assets Stores and spares 1,004 1,004 Stock-in-trade 12 1,221,235 1,012,255 Trade debts 13 2,434,515 1,702,218 Loans and advances 14 314,660 191,546 Trade deposits and short-term prepayments 15 111,031 91,257 Other receivables 16 205,761 63,928 Short term investment 17 126,929 41,042 Advance tax 180,770 196,600 Cash and bank balances 18 152,876 106,799

Total current assets 4,748,781 3,406,649 Total assets 8,379,978 6,658,424

EQUITY AND LIABILITIESShareholders’ equity Authorized share capital 140,000,000 (2014: 70,000,000) ordinary shares of Rs. 10 each 1,400,000 700,000

Issued, subscribed and paid-up share capital 19 858,407 613,148 General reserve 280,251 280,251 Unappropriated profit 3,562,012 2,520,678

Equity attributable to the Holding Company’s shareholders 4,700,670 3,414,077 Non controlling interest 318,627 260,847

Total equity 5,019,297 3,674,924

Surplus on revaluation of fixed assets 20 296,961 168,163

Non-current liabilities Long term finances - secured 21 642,857 675,000 Deferred liabilities 22 69,984 75,882

Total non-current liabilities 712,841 750,882

Current liabilities Current portion of long term finances 21 107,143 150,000 Short-term finances 23 682,334 795,882 Trade and other payables 24 1,546,745 1,082,621 Accrued mark-up 25 14,657 35,952

Total current liabilities 2,350,879 2,064,455 Total liabilities 3,063,720 2,815,337

Contingencies and commitments 26Total shareholders’ equity and liabilities 8,379,978 6,658,424

The annexed notes 1 to 48 form an integral part of these consolidated financial statements.

40

Consolidated Profit and Loss Account For the year ended June 30, 2015



Note 2015 2014 ------- Rupees in ‘000 -------

NET SALES 27 9,048,041 7,608,594

COST OF SALES 28 4,645,151 4,215,087

GROSS PROFIT 4,402,890 3,393,507

Selling and distribution expenses 29 1,965,775 1,732,102

Administrative expenses 30 261,235 262,034

2,227,010 1,994,136

OPERATING PROFIT 31 2,175,880 1,399,371

Other income 32 98,382 117,670

2,274,262 1,517,041

Other expenses 33 171,969 134,978

Share of loss from associate 1,183 -

Finance cost 34 192,291 216,184

365,443 351,162

PROFIT BEFORE INCOME TAX 1,908,819 1,165,879

Income tax expense 35 456,428 289,822

PROFIT FOR THE YEAR 1,452,391 876,057

PROFIT FOR THE YEAR ATTRIBUTABLE TO:

Shareholders of the Holding Company 1,372,837 801,638 Non-controlling interest 79,554 74,419

1,452,391 876,057

(Re-stated) 2015 2014 ------- Rupees -------

EARNINGS PER SHARE - BASIC AND DILUTED 36 15.99 9.34


A n n u a l R e p o r t 2 0 1 5 41

Consolidated Statement of Comprehensive Income For the year ended June 30, 2015



Note 2015 2014 ------- Rupees in ‘000 -------


Other comprehensive (loss)/income

Items that may be reclassified to profit and loss account subsequently

Items that will not be reclassified subsequently to profit or loss account

Remeasurement of defined benefit obligations 37.1.4 (1,802) (3,025)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,450,589 873,032

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO:

Shareholders of the Holding Company 1,371,035 798,613 Non-controlling interest 79,554 74,419

1,450,589 873,032


42

Consolidated Statement of Cash Flows For the year ended June 30, 2015



Note 2015 2014 ------- Rupees in ‘000 -------

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations after working capital changes 38 1,309,086 1,024,663 Gratuity paid (1,421) (147,133)Taxes paid (452,803) (528,820)

Net cash generated from operating activities 854,862 348,710

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment 6.1 (62,376) (87,674)Proceeds from disposal of property, plant and equipment 6.5 27,845 108,408 Additions to capital work in progress - net 6.7 (1,136) (4,915)Purchase of intangible assets 7 (2,820) (263)Expenditures incurred on investment property 8.2 (122,991) (203,879)Long-term investments made in associate 9 (63,975) (125,000)Acquisition of non-controlling interest (94,716) - Mark-up received from associated company 16 1,650 52,531 Purchase of short-term investments 17 (85,871) (41,000)

Net cash used in investing activities (404,390) (301,792)

CASH FLOWS FROM FINANCING ACTIVITIES

Finance lease rentals paid - (4,975)Long-term finance paid (75,000) (141,667)Dividends paid to shareholders of the Holding Company (162) (89,832)Dividends paid to non-controlling interest (11,500) (15,000)Finance charges paid (204,185) (193,658)

Net cash used in financing activities (290,847) (445,132)

Net (decrease)/increase in cash and cash equivalents 159,625 (398,214)

Cash and cash equivalents at the beginning of the year (689,083) (290,869)

Cash and cash equivalents at the end of the year 39 (529,458) (689,083)


A n n u a l R e p o r t 2 0 1 5 43

Consolidated Statement of Changes in Equity For the year ended June 30, 2015



Note Capital Reserve

RevenueReserve

Share capital

Reserve for issue of bonus

shares

General reserve

Total reserves

Unappropriated profit

Equity attributable to the Holding Company’s

shareholders

Non controlling interest

Total equity

-------------------------------------------------------------------- Rupees in ‘000 --------------------------------------------------------------------

Balance as at July 1, 2013 471,652 - 280,251 280,251 1,941,034 2,692,937 201,428 2,894,365

Transferred from surplus on revaluation of fixedassets on account of incremental depreciationfor the year (net of tax) 20.1 - - - - 16,857 16,857 - 16,857

Profit for the year - - - - 801,638 801,638 74,419 876,057

Other comprehensive income - - - - (3,025) (3,025) - (3,025)

- - - - 798,613 798,613 74,419 873,032

Transactions with owners

Distributions to owners of the company

Transfer to reserve for issue of bonus shares - 141,496 - 141,496 (141,496) - - -

Bonus shares issued @ 30% in the ratio of30 shares for every 100 shares held 141,496 (141,496) - (141,496) - - - -

Cash dividend paid for the year ended June 30,2013 @ Rs. 2 per share (Holding Company) - - - - (94,330) (94,330) (94,330)

Cash dividend paid for the year ended June 30,2013 @ Rs. 1.5 per share (subsidiary company) - - - - - - (15,000) (15,000)

141,496 - - - (235,826) (94,330) (15,000) (109,330)

Balance as at June 30, 2014 613,148 - 280,251 280,251 2,520,678 3,414,077 260,847 3,674,924


Profit for the year - - - - 1,372,837 1,372,837 79,554 1,452,391


- - - - 1,371,035 1,371,035 79,554 1,450,589 Transactions with owners




Cash dividend paid for the year ended June 30,2014 @ Rs. 1 per share (subsidiary company) - - - - - - (11,500) (11,500)

Changes in ownership interests in subsidiaries

Acquisition of non-controlling interest without a change in control - - - - (84,442) (84,442) (10,274) (94,716)

245,259 - - - (329,701) (84,442) (21,774) (106,216)



44

Consolidated Statement of Changes in Equity For the year ended June 30, 2015



Note Capital Reserve

RevenueReserve

Share capital

Reserve for issue of bonus

shares

General reserve

Total reserves


Equity attributable to the Holding Company’s

shareholders

Non controlling interest

Total equity

-------------------------------------------------------------------- Rupees in ‘000 --------------------------------------------------------------------


Transferred from surplus on revaluation of fixedassets on account of incremental depreciationfor the year (net of tax) 20.1 - - - - 16,857 16,857 - 16,857

Profit for the year - - - - 801,638 801,638 74,419 876,057


- - - - 798,613 798,613 74,419 873,032

Transactions with owners




Cash dividend paid for the year ended June 30,2013 @ Rs. 2 per share (Holding Company) - - - - (94,330) (94,330) (94,330)

Cash dividend paid for the year ended June 30,2013 @ Rs. 1.5 per share (subsidiary company) - - - - - - (15,000) (15,000)

141,496 - - - (235,826) (94,330) (15,000) (109,330)



Profit for the year - - - - 1,372,837 1,372,837 79,554 1,452,391


- - - - 1,371,035 1,371,035 79,554 1,450,589 Transactions with owners




Cash dividend paid for the year ended June 30,2014 @ Rs. 1 per share (subsidiary company) - - - - - - (11,500) (11,500)

Changes in ownership interests in subsidiaries

Acquisition of non-controlling interest without a change in control - - - - (84,442) (84,442) (10,274) (94,716)

245,259 - - - (329,701) (84,442) (21,774) (106,216)



44

Notes to the Consolidated Financial Statements For the year ended June 30, 2015

1 LEGAL STATUS AND OPERATIONS

The ‘Group’ consist of:

Holding company - The Searle Company Limited (the Holding Company)

Subsidiary companies - IBL HealthCare Limited - Searle Pharmaceuticals (Private) Limited - Searle Laboratories (Private) Limited - Searle Biosciences (Private) Limited

Associated companies - Nextar Pharma (Private) Limited

International Brands Limited is the ‘ultimate holding company’ as it holds 55.31% of the total paid-up share capital of the Holding Company.

The Group is engaged in manufacture and sale of pharmaceutical items, food and consumer items, manufacture of pharmaceutical items for other companies and marketing, selling and distribution of other healthcare products. Brief profile of the Holding Company and subsidiaries is as under:

a) The Searle Company Limited

The Holding Company was incorporated in Pakistan as a private limited company in October 1965. In November 1993, the Holding Company was converted to a public limited company. Its shares are quoted on the Karachi and Islamabad stock exchanges. The Holding Company is principally engaged in the manufacture of pharmaceutical products and other consumer products. In addition, the Holding Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The registered office of the Holding Company is situated at First Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi.

b) IBL HealthCare Limited

IBL HealthCare (Private) Limited was incorporated in Pakistan as a private limited company on July 14, 1997. In November 2008 the subsidiary company was converted to a public limited company and its shares were listed on Karachi Stock Exchange. The address of its registered office is 9th Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi. The principal business activities of the subsidiary are marketing, selling and distribution of healthcare products.

c) Searle Pharmaceuticals (Private) Limited

Searle Pharmaceuticals (Private) Limited was incorporated in Pakistan as a private limited company on December 18, 2012. The address of its registered office is 1st Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi. The principal business activity of the subsidiary is manufacturing of pharmaceutical products.

d) Searle Laboratories (Private) Limited

Searle Laboratories (Private) Limited was incorporated in Pakistan as a private limited company on December 26, 2012. The address of its registered office is 1st Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi. The principal business activity of the subsidiary is manufacturing of pharmaceutical products.

A n n u a l R e p o r t 2 0 1 5 45


e) Searle Biosciences (Private) Limited

Searle Biosciences (Private) Limited was incorporated in Pakistan as a private limited company during the year on August 7, 2013. The address of its registered office is 1st Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi. The principal business activity of the subsidiary is manufacturing of pharmaceutical products.

2 BASIS OF CONSOLIDATION

The consolidated financial statements includes the financial statements of Holding Company and its subsidiaries comprising together ‘the group’.

Subsidiaries

a) IBL HealthCare Limited

The Holding company can directly or indirectly exercise control over IBL HealthCare Limited, as it has significant representation in Board of directors of, and 51.97% shareholding in, IBL HealthCare Limited.

b) Searle Pharmaceuticals (Private) Limited, Searle Laboratories (Private) Limited and Searle Biosciences (Private) Limited

The Holding Company can directly exercise control over Searle Pharmaceuticals (Private) Limited, Searle Laboratories (Private) Limited and Searle Biosciences (Private) Limited as these are 100% owned by the Holding Company.

The financial statements of the subsidiaries are prepared for the same reporting year as the financial statements of the Holding Company, using consistent accounting policies.

The consolidated financial statements comprise financial statements of the Group. The assets and liabilities of the subsidiary companies have been consolidated on a line by line basis and the carrying values of the investments held by the Holding Company have been eliminated against corresponding holding in subsidiaries’ shareholders’ equity in the consolidated financial statements. All intra-group transactions, balances, income and expenses have been eliminated.

Non-controlling interests, presented as part of total equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the Holding Company and the non-controlling interests based on their respective ownership interests.

Associates

The Group is able to exert significant influence over the 27.2% (2014: 21.78%) owned Nextar Pharma (Private) Limited (NPL). NPL has not commenced operations as of the reporting date. Management has assessed its involvement in NPL in accordance with IFRSs, and has concluded that it has significant influence but not outright control. In making its judgement, management considered the Group’s voting rights, the relative size and dispersion of the voting rights held by other shareholders and the extent of recent participation by those shareholders in general meetings. Recent experience demonstrates that other shareholders participate such that they prevent the Group from having the practical ability to direct the relevant activities of NPL unilaterally.

46


3 STATEMENT OF COMPLIANCE

3.1 These consolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

3.2 STANDARDS, INTERPRETATION AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS

3.2.1 Standards, amendments and interpretations to the published standards that are relevant to the Company and adopted in the current year

Amendments, improvements of standards and interpretations Effective date

IAS 19 - Employee Contributions (Amendments to IAS 19) July 1, 2014

Annual Improvements to IFRSs 2011 - 2013 Cycle July 1, 2014


IAS 36 - Recoverable amount Disclosures for non - financial assets(Amendments to IAS 36) July 1, 2014

IFRIC 21 - Levies January 1, 2014

IAS 32 - Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) January 1, 2014

Adoption of the above revisions, amendments and interpretations of the standards have no significant effect on the amounts for the year ended June 30, 2014 and June 30, 2015.

3.2.2 Standards, amendments to published standards and interpretations that are effective but not relevant

The other new standards, amendments to published standards and interpretations that are mandatory for the financial year beginning on July 1, 2014 are considered not to be relevant or to have any significant effect on the Company’s financial reporting and operations and are therefore not presented here.

3.2.3 Standards, amendments and interpretations to the published standards that are relevant but not yet effective and not early adopted by the Company

The following new standards, amendments to published standards and interpretations would be effective from the dates mentioned below against the respective standard or interpretation.

A n n u a l R e p o r t 2 0 1 5 47


Amendments, improvements of standards and interpretations Effective date

IAS 1 - Disclosure Initiative (Amendments to IAS 1 Presentation of Financial Statements) January 1, 2016

Annual Improvements to IFRS 2012 - 2014 Cycle January 1, 2016

IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) January 1, 2016

IFRS 13 - Fair Value Measurement January 1, 2015

The Company is in the process of assessing the impact of these Standards, amendments and interpretations to the published standards on the financial statements of the Company.

3.2.4 Standards, amendments and interpretations to the published standards that are not yet notified by the Securities and Exchange Commission of Pakistan (SECP).

Following new standards have been issued by the International Accounting Standards Board (IASB) which are yet to be notified by the SECP for the purpose of applicability in Pakistan.

Standard IASB effective date(Annual periods

beginning on or after)

IFRS 14 - Regulatory Deferral Accounts January 1, 2016IFRS 15 - Revenue from Contracts with Customers January 1, 2017IFRS 9 - Financial Instruments (2014) January 1, 2018

4 SIGNIFICANT ACCOUNTING POLICIES

4.1 Basis of preparation

These consolidated financial statements have been prepared under the ‘historical cost convention’ except for revaluation of certain assets at fair value and recognition of certain retirement benefits at present value.

These consolidated financial statements have been prepared following the accrual basis of accounting except for the cash flow information.

4.2 Use of critical accounting estimates and judgments

The preparation of consolidated financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience, industry trends, legal and technical pronouncements and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

48


The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant areas requiring the use of management estimates in these consolidated financial statements relate to the following:

Note

a) Staff retirement benefits 5.3.1b) Taxation 5.4c) Useful life of depreciable and amortizable assets 5.6 & 5.7d) Revaluation of assets 5.6.3e) Estimates of recoverable amounts of inventories 5.11f) Impairment in loans and receivables 5.12g) Provisions, contingent assets and contingent liabilities 5.17h) Impairment in non-financial assets 5.18

The determination of carrying amount of staff retirement benefits that are defined benefit plans requires actuarial assumptions and estimates about financial variables such as future salary increases, and demographic variables such as employee turnover, mortality rates, etc. The Group employs services of professional actuaries to make such estimates and assumptions using actuarial techniques.

5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented.

5.1 Business combinations and investments in associates

5.1.1 Business combinations

The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement, if any. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of (a) fair value of consideration transferred, (b) the recognised amount of any non-controlling interest in the acquiree and (c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

5.1.2 Investments in associate

Associates are those entities over which the Group is able to exert significant influence but which are not subsidiaries.

A n n u a l R e p o r t 2 0 1 5 49


Investments in associates are accounted for using the equity method. Any goodwill or fair value adjustment attributable to the Group’s share in the associate is not recognised separately and is included in the amount recognised as investment.

The carrying amount of the investment in associates is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group.

Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in those entities.

5.2 Loans and finances

These are initially recognized at cost being the fair value of the consideration received together with the associated transaction cost. Subsequently, these are recognized at amortized cost using the effective interest method.

5.3 Staff retirement benefits

5.3.1 Defined benefit plans (also refer note 37)

Gratuity scheme (un-funded)

The Group operates an unfunded gratuity scheme covering all unionized employees with five or more years of service with the Holding Company, The Searle Company Limited. The provision has been made in accordance with actuarial valuations carried out as of June 30, 2015 using the projected unit credit method based on the significant assumptions stated in note 37.

5.3.2 Defined contribution plan

In addition, the Group operates a recognized provident fund scheme for its employees. Equal monthly contributions are made, both by the group companies and employees, to the fund at the rate of 10% of basic salary.

5.4 Taxation

5.4.1 Current

The charge of current tax is based on taxable income at the applicable rate of taxation after taking into account available tax credits and rebates. Income for the purpose of computing current taxation is determined under the provisions of tax laws.

5.4.2 Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all taxable temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

50


Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted. The Group takes into account the current income tax law and decisions taken by the taxation authorities.

Deferred tax is charged or credited in the profit or loss account, except in the case of items credited or charged to other comprehensive income/equity in which case it is included in other comprehensive income/equity.

5.5 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which these are incurred.

5.6 Property, plant and equipment, depreciation and finance leases

5.6.1 Initial recognition

An item of property, plant and equipment is initially recognized at cost which is equal to the fair value of consideration paid at the time of acquisition or construction of the asset.

5.6.2 Leases

The Group accounts for property, plant and equipment acquired under finance leases by recording the assets and the related liability. These amounts are determined at the inception of lease, on the basis of the lower of the fair value and the present value of minimum lease payments. Financial charges are allocated to the accounting period in a manner so as to provide a constant rate of charge on the outstanding liability.

Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

5.6.3 Measurement subsequent to initial recognition

a) Carried using revaluation model

Building on leasehold land, plant and machinery, motor vehicles and air conditioning systems are stated at their revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Leasehold land is stated at its revalued amount. Fair value is determined by external professional valuers with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.

b) Carried using cost model

Property, plant and equipment other than those mentioned above are stated at cost less accumulated depreciation and accumulated impairment losses.

c) Depreciation

Depreciation on assets (other than leasehold land) is charged to income applying the straight-line method whereby the cost of an asset is written off over its useful life. Same basis and estimates for depreciation are applied to owned assets and assets acquired under finance lease.

A n n u a l R e p o r t 2 0 1 5 51


Depreciation on additions is charged from the month during which the asset is available for use. For disposals during the year, depreciation is charged up to the end of the month preceding the month of disposal. Depreciation is charged to income or included in the cost of inventory by applying the rates mentioned in note 6.1.

Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired.

Gain and loss on disposal of property, plant and equipment is included in income currently.

d) Surplus on revaluation of fixed assets

The surplus arising on revaluation of fixed assets is credited to the “Surplus on Revaluation of Fixed Assets” shown below equity in the balance sheet in accordance with the requirements of section 235 of the Companies Ordinance, 1984. Accordingly the Group has adopted the following accounting treatment of depreciation on revalued assets, keeping in view Securities and Exchange Commission of Pakistan’s (SECP) SRO 45(1)/2003 dated January 13, 2003:

- depreciation on assets which are revalued is determined with reference to the value assigned to such assets on revaluation and depreciation charge for the year is taken to the profit and loss account; and

- an amount equal to incremental depreciation for the year net of deferred taxation is transferred from “Surplus on Revaluation of Fixed Assets” account to accumulated profit through statement of changes in equity to record realization of surplus to the extent of the incremental depreciation charge for the year.

5.6.4 Capital work in progress

Capital work-in-progress (CWIP) is stated at cost less any impairment loss. All expenditures in connection with specific assets incurred during installation and construction period are carried to CWIP. These expenditures are transferred to operating assets as and when these are available for intended use.

5.7 Intangible assets

- An intangible asset is initially recognized at cost which is equal to the fair value of consideration paid at the time of acquisition of the asset. Intangible assets are subsequently stated at cost less accumulated amortization and accumulated impairment losses. Gain and loss on disposal of intangible assets is included in income currently.

- Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortization and accumulated impairment losses, if any.

- Intangibles having infinite life are carried at cost less impairment, if any.

- Amortization is calculated using the straight line method to allocate the cost of trademarks and licenses over the useful lives (3 - 15 years) by applying the rates mentioned in note 7 to the financial statements.

52


5.8 Investment properties

The Group carries investment properties at their respective costs under the cost model in accordance with IAS 40 ‘Investment Property’. The fair values are determined by the independent valuation experts and such valuations are carried out every year to determine the recoverable amount.

Building classified under investment property is carried at its respective cost less accumulated depreciation and accumulated impairment losses if any.

Leasehold land classified under investment properties is carried at its respective cost less accumulated impairment losses, if any.

The Group carries investment property under work in progress at their respective costs less accumulated impairment losses if any. Depreciation is charged on such property after it is completed as per IAS 40 ‘Investment Property’.

5.9 Investments

5.9.1 Investment in associated companies

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights or common directorship. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss of the associate after the date of acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

5.9.2 Short term investment

All investments are initially recognised at the fair value of the consideration given and include transaction costs except for held for trading investments in which case transaction costs are charged to the profit and loss account. All purchases and sales of investments that require delivery within the time frame established by regulations or market convention are accounted for at the trade date. Trade date is the date when the Company commits to purchase or sell the investments.

a) Fair value through profit or loss (FVTPL) - Held for trading

Financial assets at FVTPL include financial assets that are either classified as held for trading (HFT) or that meet certain conditions and are designated at FVTPL upon initial recognition. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

A n n u a l R e p o r t 2 0 1 5 53


Investments which are acquired with the intention to trade by taking advantage of short term market/interest rate movements are considered as held for trading. Dividend income and entitlement of bonus shares are recognized when the Company’s right to receive such dividend and bonus shares is established.

5.10 Stores and spares

All stores, spares and loose tools either imported or purchased locally are charged to income when consumed and are valued at cost, which is determined on a first-in-first-out basis. Spares-in-transit are valued at cost accumulated to the balance sheet date. A provision is made for any excess of book value over net realizable value.

The Group reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence, if there is any change in usage pattern and physical form of related stores, spares and loose tools.

5.11 Stocks-in-trade

These are valued at the lower of cost and net realizable value except goods-in-transit which are valued at invoice price and related expenses incurred up to the balance sheet date. Cost signifies standard cost adjusted by variances.

Cost of raw and packing material comprises purchase price including directly related expenses less trade discounts. Cost of work-in-process and finished goods includes cost of raw material, direct labour and related production overheads.

Net realizable value signifies the estimated selling price in the ordinary course of business less cost of completion and cost necessary to be incurred in order to make the sale.

5.12 Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Subsequent to initial measurement loans and receivables are measured at amortized cost using the effective interest method, less provision for impairment. Gains/Losses arising on remeasurement of loans and receivables are taken to the profit and loss account.

Gain or loss is also recognized in profit and loss account when loans and receivables are derecognized or impaired, and through the amortization process.

Interest free loans to employees are stated at cost and recovered in equal monthly instalments through salary of the employees.

5.13 Cash and cash equivalents

Cash and cash equivalents comprise cash balances, and current and deposit account balances with banks. Running finance facilities availed by the Group, which are payable on demand and form an integral part of the Group’s cash management are included as part of cash and cash equivalents for the purpose of statement of cash flows.

54


5.14 Foreign currencies

Transactions in foreign currencies are accounted for in rupees at the rate of exchange prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies as at the balance sheet date are expressed in rupees at rates of exchange prevailing on that date except where forward exchange cover has been obtained for payment of liabilities, in which case the contracted rates are applied. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transactions. Exchange gains and losses are included in income currently.

5.15 Revenue recognition

Revenue is recognized when it is probable that economic benefits will flow to the Group and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable on the following basis:

- Sales are recorded on despatch of goods. Export sales are recorded when the goods are shipped.

- Toll manufacturing income is recognized when services are rendered.

- Dividend income, other than those from investments measured using equity method, is recognized when the Group’s right of receipts is established.

- Bank profit and commission income are recognized on accrual basis.

- Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature.

5.16 Research and development cost

- Research cost is charged to income as and when incurred.

- Development cost is charged to income when it does not meet the criteria of capitalization as specified in IAS 38 ‘Intangible Assets’.

5.17 Provisions, contingent assets and contingent liabilities

Provisions are recognized in the consolidated balance sheet when the Group has a legal or constructive obligation, as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of obligation.

Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

A n n u a l R e p o r t 2 0 1 5 55


Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.

No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.

5.18 Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists the assets’ recoverable amount is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in consolidated profit and loss account.

5.19 Financial instruments

5.19.1 Recognition

A financial instrument (financial asset or financial liability) is recognized in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets carried on the consolidated balance sheet include cash and bank balances, investments, trade and other receivables, loans, advances and deposits.

Financial liabilities carried on the consolidated balance sheet include long term finances, liabilities against assets subject to finance lease, short term running finances, trade and other payables and accrued mark-up.

At the time of initial recognition i.e. at the time when the Group becomes a party to the contractual provisions of the instrument, all financial assets and financial liabilities are measured at cost, which is the fair value of the consideration given or received for it following trade date accounting. Transaction costs are included in the initial measurement of all financial assets and liabilities except for transaction costs incurred on financial assets and liabilities classified as ‘at fair value through profit or loss’ and held for trading and that may be incurred on disposal. The particular recognition methods adopted for the measurement of financial assets and liabilities subsequent to initial measurement are disclosed in the policy statements associated with each item.

Financial assets or a part thereof is derecognized when the Group looses control of the contractual rights that comprise the financial asset or part thereof. Financial liabilities or a part thereof is removed when it is extinguished, i.e. the obligation specified in contract is discharged, cancelled or expired.

5.19.2 Off-setting

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

56


5.19.3 Regular way purchase and sale transactions

All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention are recognized at the trade date. Trade date is the date on which the Group commits to purchase or sell the asset.

5.20 Operating expense

Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred. Expenditure for warranties is recognised when the Group incurs an obligation, which is typically when the related goods are sold or services provided.

5.21 Related party transactions

All transactions involving related parties arising in the normal course of business are conducted at arm’s length at normal commercial rates on the same terms and conditions as third party transactions using valuation modes, as admissible, except in extremely rare circumstances where, subject to the approval of the Board of Directors, it is in the interest of the Group to do so.

5.22 Dividend

Dividend distribution to the shareholders’ of the Holding Company is recognized as a liability in the Group’s consolidated financial statements in the period in which such dividends are approved.

5.23 Functional and presentation currency

Items included in the consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates. The consolidated financial statements are presented in Pakistani Rupees, which is the Group’s functional and presentation currency.

5.24 General

- Figures have been rounded-off to nearest thousand rupee.

- The comparative figures have been reclassified where considered necessary for the purpose of better presentation of the consolidated financial statements. However, no material reclassifications are made in these consolidated financial statements which have not been disclosed separately.

A n n u a l R e p o r t 2 0 1 5 57


Note 2015 20146 PROPERTY, PLANT AND EQUIPMENT ---Rupees in ‘000 ---

Operating assets 6.1 688,354 557,745

Capital work in progress - at cost 6.7 - 2,407 688,354 560,152

6.1 The following is a statement of operating assets: Owned assets Leased assets

Total Leasehold land*

Building on leasehold

land

Plant and machinery

Office equipment

Furniture and fixtures Vehicles Air -

conditioning Sub-total Plant and machinery Vehicles Sub-total

------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------- As at June 30, 2014 Cost / revalued amount 273,976 181,768 702,958 46,514 24,180 43,367 56,470 1,329,233 - 9,837 9,837 1,339,070 Accumulated depreciation - (121,569) (508,493) (38,553) (18,940) (29,836) (54,097) (771,488) - (9,837) (9,837) (781,325)Net book amount 273,976 60,199 194,465 7,961 5,240 13,531 2,373 557,745 - - - 557,745

Year ended June 30, 2015 Opening net book amount 273,976 60,199 194,465 7,961 5,240 13,531 2,373 557,745 - - - 557,745 Additions 18,073 - 12,883 19,929 290 13,679 1,065 65,919 - - - 65,919 Upward revaluation 128,798 - - - - - - 128,798 128,798 Transfers/adjustment Cost / revalued amount - - - - - - - - - - - - Accumulated depreciation - - - - - - - - - - - -

- - - - - - - - - - - - Disposal (refer note 6.5) Cost / revalued amount - - - (541) - (27,247) (234) (28,022) - - - (28,022)Accumulated depreciation - - - 360 - 18,726 143 19,229 - - - 19,229

- - - (181) - (8,521) (91) (8,793) - - - (8,793)Depreciation charge (refer note 6.4) - (5,026) (37,465) (5,468) (1,442) (5,082) (832) (55,315) - - - (55,315)

Closing net book amount 420,847 55,173 169,883 22,241 4,088 13,607 2,515 688,354 - - - 688,354

As at June 30, 2015 Cost / revalued amount 420,847 181,768 715,841 65,902 24,470 29,799 57,301 1,495,928 - - - 1,495,928 Accumulated depreciation - (126,595) (545,958) (43,661) (20,382) (16,192) (54,786) (807,574) - - - (807,574)

Net book amount 420,847 55,173 169,883 22,241 4,088 13,607 2,515 688,354 - - - 688,354

As at June 30, 2013 Cost / revalued amount 273,976 177,214 647,115 38,664 23,327 124,382 55,617 1,340,295 - 20,764 20,764 1,361,059 Accumulated depreciation - (112,853) (455,452) (32,531) (17,512) (93,417) (49,608) (761,373) - (16,283) (16,283) (777,656)Net book amount 273,976 64,361 191,663 6,133 5,815 30,965 6,009 578,922 - 4,481 4,481 583,403

Year ended June 30, 2014 Opening net book amount 273,976 64,361 191,663 6,133 5,815 30,965 6,009 578,922 - 4,481 4,481 583,403 Additions - 4,554 55,843 5,490 853 23,354 853 90,947 - - - 90,947 Transfers (refer note 6.7) Cost / revalued amount - - - - - 5,892 - 5,892 - (8,521) (8,521) (2,629)Accumulated depreciation - - - - - (3,059) - (3,059) - 5,688 5,688 2,629

- - - - - 2,833 - 2,833 - (2,833) (2,833) - Disposal Cost / revalued amount - - - (408) - (107,183) - (107,591) - (2,406) (2,406) (109,997)Accumulated depreciation - - - 290 - 73,570 - 73,860 - 1,327 1,327 75,187

- - - (118) - (33,613) - (33,731) - (1,079) (1,079) (34,810)Depreciation charge (refer note 6.4) - (8,716) (53,041) (3,544) (1,428) (10,008) (4,489) (81,226) - (569) (569) (81,795)Closing net book amount 273,976 60,199 194,465 7,961 5,240 13,531 2,373 557,745 - - - 557,745

As at June 30, 2014 Cost / revalued amount 273,976 181,768 702,958 43,746 24,180 46,445 56,470 1,329,543 - 9,837 9,837 1,339,380 Accumulated depreciation - (121,569) (508,493) (35,785) (18,940) (32,914) (54,097) (771,798) - (9,837) (9,837) (781,635)Net book amount 273,976 60,199 194,465 7,961 5,240 13,531 2,373 557,745 - - - 557,745

- 5% and 20%

10%, 20% and 33%

10%, 20% and 33%

10%, 20% and 33% 20% 10% and

20% 10% 20% Depreciation rate

* Includes land having market value / fair value of Rs. 88.375 million (2014: Rs. 88.375 million) for which lease in the name of the Holding Company has not been finalised.

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6.3 Had there been no revaluation of leasehold land, building on lease hold land, plant and machinery, vehicles and air-conditioning system, cost and written down value of revalued assets would have been as follows:

Note 2015 2014 ------- Rupees in ‘000 -------

6.3.1 Cost of assets held under revaluation model

Owned assetsLeasehold land 123,886 105,813 Building on lease hold land 55,173 144,134 Plant and machinery 521,585 508,702 Vehicles 29,799 43,367 Air conditioning system 20,837 20,006

751,280 822,022

6.3.2 Net book amount under cost model of assets held under revaluation model

Owned assetsLeasehold land 123,886 105,813 Building on lease hold land 55,173 60,199 Plant and machinery 169,883 194,465 Vehicles 13,607 13,531 Air conditioning system 2,515 2,373

365,064 376,381

6.4 The depreciation expense has been allocated as follows:

Cost of sales 28 45,387 68,572 Selling and distribution expenses 29 29,874 8,442 Administrative expenses 30 5,004 4,781

80,265 81,795

6.2 The Holding Company had revalued its operating assets classified under lease hold land, building on lease hold land, plant and machinery, vehicles and air-conditioning as at April 16, 2015. The valuation was performed by an independent valuer, M/s. Anderson Consulting (Private) Limited. The surplus arising as a result of accounting under revaluation model based on that valuation was not material other than land, therefore, effect of revaluation related land had been taken in the consolidated financial statements for the year ended June 30, 2015.

A n n u a l R e p o r t 2 0 1 5 59


6.5 Following items of property, plant and equipment were disposed off during the year:

Description of asset sold Cost /

revalued amount

Accumulated depreciation

Net book value

Sale proceeds

Gain / (loss) Mode of disposal Particulars of buyers

--------------------------- (Rupees in ‘000) ---------------------------

Vehicles 470 415 55 365 310 Advertisement

/ bidMr. Munawwar Mirza, House No. N-760, Surjani Town, Sector 7-D, Karachi

82 19 63 432 369 Advertisement / bid

Mr. Diamond Peerani - Flat # C-21 Noor Apartment North Nazimabad Block E, Karachi.


Mr. Saeed Ur Rehman, R-54,Block E, North Nazimabad, Karachi


Mr.Sohail Malik - House No. B-110, Sector 9, North Karachi, Karachi


Mr. Yaseen Hanif, H.No Fl-1, 4/19, Block 5, North Nazimabad, Karachi




Mr.Sohail Malik - House No. B-110, Sector 9, North Karachi, Karachi

1,289 1,096 193 1,000 807 Advertisement / bid

Mr.Taj Muhammad (Employee), H.No 29, Hasan House, Momin Town, Peshawar


Mr. Hasan Shahid, House No.E-173/2A, Lane 2, Madni Park, Farooq Colony, Walton Road, Lahore

Balance carried forward 3,148 2,099 1,049 3,932 2,883

60



revalued amount


Net book value

Sale proceeds


--------------------------- (Rupees in ‘000) ---------------------------

Balance brought forward

3,148 2,099 1,049 3,932 2,883


Mr. Anas Peeran, D-35, Street 1, Block H, North Nazimabad, Karachi


Mr.Jawwad Ahmad, House No. R-421, Buffer Zone, Sector 15-A-3, Karachi


Mrs.Shagufta Sohail Malik - House No. B-110, Sector 9, North Karachi, Karachi


Mr.Mansoor Majid (Employee), House No. C-20/9, Malir Colony, Karachi


Mr.M. Saleem - Block # 408, Bantwa Nagar, Liaquatabad Karachi.



4,900 4,655 245 3,325 3,080 Advertisement / bid

Myplan Pharmaceuticals (Private) Limited, 32 Km, Multan Road, Lahore.


Mr.M.Ashfaq (Employee), Flat No. 207, Eden Willa, Karachi East.


Mr.Ghulam Mahmood (Employee), B-1, Jan Plaza, North Nazimabad, Near Sakhi Hassan, Block K, Karachi


Mr.Jawwad Ahmad, House No. R-421, Buffer Zone, Sector 15-A-3, Karachi


A n n u a l R e p o r t 2 0 1 5 61



revalued amount


Net book value

Sale proceeds


--------------------------- (Rupees in ‘000) ---------------------------

Balance brought forward 10,683 7,209 3,474 12,753 9,279


Mr.M.Faheem Modi, Beverley Homes, House No. D-89/B, Clifton Block 7, Karachi


Mr.M.Faheem Modi, Beverley Homes, House No. D-89/B, Clifton Block 7, Karachi


Mr.M.Javed Akhtar (Employee), H.No 438, Sector 14, Block D, Karachi


Mr.Shehzad Aziz (Employee), Street No 4, Dilzaak Road, Faisal Colony, Peshawar

977 163 814 1,360 546 Advertisement / bid

Mr.S.Masroor Hussain (Employee), H.No B-17, Maisam Plaza, Block 3, Gulshan-E-Iqbal, Karachi

2,479 702 1,777 2,150 373 Advertisement / bid

Ms. Muneeza Imran, Flat No. D/8, Dolmen Heights, Shaheed-e-Millat Road, Karachi.

612 204 408 408 - Advertisement / bid

Shagufta Sohail Malik House No. R-110, Sector-9 Block-19, North Karachi


Jawad Ahmed House No. R-421, Sector-15-A-3, Bufferzone, Karachi.


Ghulam Mehmood House No. B-1, Block-K, Jan Plaza, North Karachi.

Sub-total 18,333 10,018 8,315 20,180 11,865

Aggregate of assets disposed off having written down value below Rs. 50,000 each

Office equipment 541 361 180 83 (97)

Air Conditioners 234 143 91 47 (44) -

Vehicles 8,914 8,707 207 7,535 7,328

Sub-total 9,689 9,211 478 7,665 7,187

Total - 2015 28,022 19,229 8,793 27,845 19,052

Total - 2014 109,997 75,187 34,810 108,408 73,598

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Note 2015 2014 ------(Rupees in ‘000)------

6.6 Net gain on disposal of property, plant and equipment has been presented as follows:

Other operating income - gain on disposal of property, plant and equipment 32 19,193 74,322

Other operating expenses - loss on disposal of property, plant and equipment 33 (141) (724)

19,052 73,598

6.7 Movement in capital work in progress

Balance at the beginning of the year 2,407 765 add: Additions during the year 1,136 4,915 less: Transfer to operating assets (3,543) (3,273)Balance at the end of the year - 2,407

7 INTANGIBLE ASSETSDistribution

rights Brand name

& logo Software licenses Total

------------------(Rupees in ‘000)------------------

Year ended June 30, 2015 Opening net book value 13,990 32,916 876 47,782 Additions - - 2,820 2,820 Disposal - - - - Amortiation charge (4,803) (5,000) (954) (10,757)Closing net book value 9,187 27,916 2,742 39,845

As at June 30, 2015 Cost 268,475 74,703 15,399 358,577 Accumulated amortization (247,159) (46,787) (12,657) (306,603)Accumulated Impairment (12,129) - - (12,129)Net book value 9,187 27,916 2,742 39,845

Year ended June 30, 2014 Opening net book value 34,842 37,916 1,313 74,071 Additions - - 263 263 Amortization charge (8,723) (5,000) (700) (14,423)Impairment (12,129) - - (12,129)Closing net book amount 13,990 32,916 876 47,782

As at June 30, 2014 Cost 268,475 74,703 12,619 355,797 Accumulated amortization (242,356) (41,787) (11,743) (295,886)Accumulated impairment (12,129) - - (12,129)Net book value 13,990 32,916 876 47,782

Amortization rate 10% 10% 33.33% and 20%

7.1 Software licenses include various licenses and enterprise resources planning software.

A n n u a l R e p o r t 2 0 1 5 63


Note 2015 20148 INVESTMENT PROPERTY ---- Rupees in ‘000 ----

Operating assets 8.1 2,614,906 2,039,459 Investment property under work in progress - at cost 8.2 - 477,406

2,614,906 2,516,865

8.1 The following is a statement of operating assets:

Owned assets

Total Leasehold land


land

Office Equipment

Electrical Equipment

Lifts & Elevators Generators Furniture &

FixturesAir -

conditioning

----------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------- As at June 30, 2014 Cost / revalued amount 2,039,459 - - - - - - - 2,039,459 Accumulated depreciation - - - - - - - - -

Net book amount 2,039,459 - - - - - - - 2,039,459

Year ended June 30, 2015 Opening net book amount 2,039,459 - - - - - - - 2,039,459 Additions - 353,254 7,597 52,402 41,200 22,136 38,168 85,640 600,397 Depreciation charge - (10,137) (886) (3,057) (2,403) (1,291) (2,180) (4,996) (24,950)

Closing net book amount 2,039,459 343,117 6,711 49,345 38,797 20,845 35,988 80,644 2,614,906

As at June 30, 2015 Cost / revalued amount 2,039,459 353,254 7,597 52,402 41,200 22,136 38,168 85,640 2,639,856 Accumulated depreciation - (10,137) (886) (3,057) (2,403) (1,291) (2,180) (4,996) (24,950)

Net book amount 2,039,459 343,117 6,711 49,345 38,797 20,845 35,988 80,644 2,614,906

8.2 Movement in investment property under work in progress - at cost

Balance at the beginning of the year 477,406 273,527 add: Addition under work in progress 122,991 203,879 add: Transfer to operating assets - investment property (600,397) - Balance at the end of the year - 477,406

8.3 Leasehold land, held by the Holding Company, classified under investment property had been valued under the market value basis by an independent valuer, M/s. Iqbal A. Nanjee & Co. (Private) Limited. Market value of the property based on the valuation as of September 30, 2014 was Rs. 1.851 billion. Further, all other assets classified under investment property have been valued under the market value basis by the same valuer. Market value of these assets based on the valuation as of September 29, 2015 was Rs. 693.047 million.

Moreover, valuation of property held by subsidiary, has been carried out by M/s. Harvester Services (Private) Limited, an independent valuer engaged by the Company. Market value of investment property as on June 30, 2015 is Rs. 137.398 million (June 30, 2014 Rs.128.475 million).

64


Note 2015 2014 ----- (Rupees in ‘000) -----

9 LONG TERM INVESTMENT

Investment in associate - under equity method

Balance at the beginning of year 124,500 - Additions during the year 64,475 124,500 Share of loss for the year (1,183) -

187,792 124,500

9.1 This represents 1,360,000 (2014: 830,000) fully paid ordinary shares of Rs. 100 each in Nextar Pharma (Private) Limited (NPL), which represents 27.20% (2014: 21.78%) of the total share capital of NPL.

The shares of NPL are not listed on any stock exchange and hence published price quotes are not available. NPL has not commenced operations as of the reporting date. The financial reporting date of NPL is June 30. Total equity/net assets of NPL amounted to Rs. 587.437 million based on un-audited financial statements for the year ended June 30, 2015.

All transfers of funds to the Company, i.e. distribution of cash dividends, are subject to approval by means of a resolution passed by the shareholders of NPL. The Company has not received any cash dividend during the year (2014: Nil). Moreover, the Company has not incurred any contingent liability or other commitments relating to its investments in associates.

10 LONG TERM LOANS Note 2015 2014 ----- (Rupees in ‘000) -----

Loans - considered good, to:Related party 10.1 98,000 - Employees 10.2 2,005 4,035

less: Current portion - shown under ‘loans and advances’ (refer note 14) (1,303) (3,157)

98,702 878

10.1 This represent loan to International Brands Limited (the associated company) . The tenure of the loan is 5 years with a grace period of 1 year payable in equal bi-annual installments. The rate of mark-up is 12 months KIBOR+1%.

10.2 This represents interest-free loans for automobiles to employees other than executives, as defined in note 42. These are secured against provident fund balances of respective employees, and are repayable in equal monthly installments over a term of four to five years.

10.3 The maximum aggregate amount of these loans outstanding at any time during the year was Rs. 2.59 million (2014: Rs. 7.93 million). Such maximum amount is calculated by reference to the month-end balance.

Note 2015 2014 ----- (Rupees in ‘000) -----

11 LONG TERM DEPOSITS

Deposit against property obtained under operating lease 1,598 1,598

A n n u a l R e p o r t 2 0 1 5 65


Note 2015 2014 ----- (Rupees in ‘000) -----

12 STOCK-IN-TRADE

Raw materials 441,818 292,963 Packing materials 144,532 160,079 Work in process 28 100,148 58,886 Finished goods - net 12.1 & 28 396,370 406,025 Materials in transit 138,367 94,302

1,221,235 1,012,255

12.1 Finished goods - gross 399,394 408,989 Provision for obsolescence - Opening balance (1,301) - - Charge for the year - (1,301) - Closing balance (1,301) (1,301)

Finished goods, directly written-off (1,723) (1,663)Finished goods - net 396,370 406,025

13 TRADE DEBTS

Considered good Export debtors, secured 60,467 37,925 Due from: Associated companies-unseured 13.1, 13.2

& 42.2 2,049,855 1,414,832 - others - unsecured 324,193 249,461

2,374,048 1,664,293

2,434,515 1,702,218

Considered doubtful - others 2,287 2,641 less: Provision for doubtful debts 13.3 (2,287) (2,641)

- - 2,434,515 1,702,218

13.1 The receivable is stated net of amounts payable aggregating Rs. 58.49 million (2014: Rs. 100.87 million) on account of expenses claimed by IBL Operations (Private) Limited, an associated company.

13.2 At year-end, no amount was due from directors, chief executive and executives of the Group in respect of trade debts. Moreover, trade debts from related parties other than directors, chief executive and executives of the Group are as follows:

2015 2014 ----- (Rupees in ‘000) -----

- IBL Operations (Private) Limited 2,032,522 1,398,461 - United Brands Limited 16,840 15,965 - Dunkin Donuts 10 284 - Habitt 483 122

2,049,855 1,414,832

66


13.3 At year-end, trade debts aggregating Rs. 2.622 million (2014: Rs. 2.641 million) were deemed to have been impaired. These balances are outstanding for more than 4 years. The movement of provision for doubtful debts is as follows:

Note 2015 2014 ----- (Rupees in ‘000) -----

Balance at the beginning of the year (2,641) (976)Provision made during the year 30 - (1,665)Reversal made during the year 354 Balance at the end of the year (2,287) (2,641)

13.4 In addition, some of the unimpaired trade debts are past due as at the reporting date, no provision has been made in respect of such trade debts. The aging of trade debts ‘past due’ but not impaired of related parties is as follows:

Age analysis of ‘past due’ but not impaired trade debts due from related parties

2015 2014 ----- (Rupees in ‘000) -----

- More than two months but less than four months 883,172 404,218 - More than four months but less than one year 14,571 1,886 - One year or more but less than two years 14 42,819 - Two years and more 40,700 26

938,457 448,949

13.5 Competition Commission of Pakistan (CCP) through its order dated September 13, 2007 instructed the Holding Company to reduce terms of trade credit with IBL Operations (Private) Limited, an associated concern, re-negotiate the offered rate of commission and conduct audit of the transactions. The Holding Company filed a counter case in Honourable High Court of Sindh to revert the order. The Holding Company, based on the opinion of its legal advisor, believes that it has a strong case and the matter would be decided in its favour.

14 LOANS AND ADVANCES Note 2015 2014 ----- (Rupees in ‘000) -----

Considered good: Advances to:

- employees 14.1 49,544 42,442 - suppliers 263,813 145,947

313,357 188,389 Current portion of long-term loans 10 1,303 3,157 Considered doubtful: 14.2 - 51 less: Provision for doubtful advances - (51)

- - 314,660 191,546

A n n u a l R e p o r t 2 0 1 5 67


14.1 These include advance against salary for house rent to employees. These are interest free and repayable on monthly basis. Moreover, this includes advances for business purposes. The reconciliation of amounts due from executives and non-executives of the Group is given as follows:

2015 2014 Executives Non-

executives Total Executives Non-executives Total

----------------------------------- (Rupees in ‘000) -----------------------------------

Opening balance 18,633 23,809 42,442 7,358 17,643 25,001

Add: Disbursements 59,400 112,643 172,043 47,284 92,709 139,993

Less: Repayments (57,808) (107,133) (164,941) (36,009) (86,543) (122,552)

Closing balance 20,225 29,319 49,544 18,633 23,809 42,442

14.2 During the year the Company recovered loans and advances aggregating Rs. 0.051 million which were deemed to have been impaired for the past three years.

14.3 The maximum aggregate amount of advances to employees outstanding at any time during the year was Rs. 54.620 million (2014: Rs. 68.791 million). Such maximum amount is calculated by reference to the month-end balance.

Note 2015 2014 ---- (Rupees in ‘000) ----

15 TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS

Deposits- Trade deposits 48,363 43,612

Less: Provision for doubtful deposits 15.1 (2,640) (2,640)

45,723 40,972

Prepayments 65,308 50,285 111,031 91,257

15.1 At year-end, trade deposits amounted to Rs. 14.15 million (2014: Rs. 13.37 million) were past due but not impaired. These balances are outstanding for more than two years. There has been no movement in provision for doubtful deposits during the year (2014: nil).

68


2015 2014 Note ---- (Rupees in ‘000) ----

16 OTHER RECEIVABLES

Receivables from related parties

Due from associated companies:

- IBL Operations (Private) Limited against:

- mark-up on over due balance 16.1 39,642 41,292

- staff salaries and benefits 1,278 -

- International Franchises Limited against staff salaries and benefits 2,154 3,634

- Habitt against staff salaries and benefits 7,256 1,342

16.2 & 42.2 50,330 46,268

Interest receivable on loan 4,478 -

Surplus arising under retirement benefit fund 5,250 7,500

Advance against issue of shares 16.3 - 500

Receivables from other than related parties

Others, considered good 145,703 9,660 205,761 63,928

16.1 The receivable represents mark-up charged on cash collected at the rate of 6-months KIBOR plus 3% per annum as late payment liquidated damages with an exception of transaction delay. On January 15, 2011 the distribution agreement was amended, accordingly no mark-up has been charged since then.

16.2 At year-end, an amount of Rs. 39.64 million (2014: 41.29 million) is due from associated company which is past due but not impaired. These balances are outstanding for more than one year.

16.3 This represents advance amounting to Rs. Nil (2014: Rs. 0.5 million) paid to Nextar Pharma (Private) Limited for issue of shares.

A n n u a l R e p o r t 2 0 1 5 69


17 SHORT TERM INVESTMENT

Investment in other than related parties

Note 2015 2014 2015 2014(Number of units in ‘000) ---- (Rupees in ‘000) ----

Meezan Sovereign Fund - at cost 1,791,408 892,126 89,734 41,000NAFA Islamic Aggressive Income Fund 3,925,360 37,179 - add: Unrealised gain on revaluation 32 16 42

126,929 41,042

Short term investments include investment in Meezan Sovereign Fund and NAFA Islamic Aggressive Income Fund, open end mutual funds. The rating of the Meezan Fund is ‘AA+’ as per the credit rating agency JCR-VIS and that of NAFA Fund is ‘A-’ and the credit rating agency is PACRA. The investments have been classified as “financial assets at fair value through profit and loss”.

Note 2015 2014 ---- (Rupees in ‘000) ----

18 CASH AND BANK BALANCES

Cash in hand 1,478 1,359 Cheques in hand 100,000 -

Cash with banks in:- saving accounts 18.1 21,386 12 - current accounts 30,012 105,428

18.2 152,876 106,799

18.1 These balances carry mark-up at a rate of 3.5% (2014: 6.5%).

18.2 This includes Rs. 8.02 million (2014: Rs. 8.19 million) placed in special bank accounts for dividend purposes.

19 ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL

2015 2014 2015 2014 (Number of shares) ---- (Rupees in ‘000) ----

Ordinary shares of Rs. 10 each:

- fully paid in cash 3,969,000 3,969,000 39,690 39,690 - issued for consideration other than cash 24,000 24,000 240 240- issued as fully paid bonus shares 81,847,745 57,321,818 818,477 573,218

85,840,745 61,314,818 858,407 613,148

70


2015 2014 (Number of shares)

19.1 Movement in number of shares

Number of shares at beginning of the year 61,314,818 47,165,245 Bonus shares issued during the year 24,525,927 14,149,573 Number of shares at end of the year 85,840,745 61,314,818

19.2 Capital management policies and procedures

The Group’s objectives when managing above capital are:

- to safe guard its ability to continue as a going concern so that it can continue to provide returns to share holders and benefit other stakeholders; and

- to maintain a strong capital base to support the sustained development of its business.

The Group manages its capital structure by monitoring return on net assets and maintaining optional capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares and other means commensurate to the circumstances.

20 SURPLUS ON REVALUATION OF FIXED ASSETS - net of deferred tax

The Holding Company had revalued its operating assets classified under lease hold land, building on lease hold land, plant and machinery, vehicles and air-conditioning as at April 26, 2015. The valuation was performed by an independent valuer, M/s. Anderson Consultaning (Private) Limited. The surplus arising on assets other than land as a result of accounting under revaluation model based on that valuation was not material, therefore, no effect of revaluation adjustment had been taken in the financial statements for the year ended June 30, 2015. These assets were earlier carried at such revalued amounts as determined by an independent valuer, M/s. Iqbal A. Nanjee as at June 30, 2004.

The surplus would be realized on disposal of revalued assets and charge of incremental depreciation.

2015 2014 ---- (Rupees in ‘000) ----

Surplus on revaluation of property, plant and equipment (the surplus) 20.1 296,961 168,163

less: Impact of deferred tax liability on the surplus 20.2 - -Surplus on revaluation of fixed assets - net of deferred tax 296,961 168,163

A n n u a l R e p o r t 2 0 1 5 71


20.1 Surplus on revaluation of property, plant and equipment (the surplus)

Note 2015 2014 ---- (Rupees in ‘000) ----

Surplus on revaluation of property, plant and equipment at the beginning of the year 168,163 193,705

Increase in surplus on revaluation during the year 128,798 Transferred / realization of the surplus to accumulated

profit - net of deferred tax: - relating to incremental depreciation - (16,857)- relating to surplus on revaluation of fixed assets disposed

off during the year - - 296,961 176,848

Adjustment for deferred tax liability in respect of transfers / realizations made - (8,685)

Surplus on revaluation of property, plant and equipment at the end of the year 296,961 168,163

20.2 Impact of deferred tax liability on the surplus

Deferred tax liability on the surplus at beginning of the year - (8,685)Adjustment for deferred tax liability in respect of transfers/

realizations made - 8,685 Deferred tax liability on the surplus at end of the year - -

21 LONG TERM FINANCES - secured

Syndicated finance - from banking companies 21.1 750,000 825,000 Less: Current portion of long term finances shown under

current liabilities (107,143) (150,000) 642,857 675,000

21.1 The Holding Company has arranged syndicate term finance facilities of Rs. 900 million (2014: Rs. 900 million) for a tenure of five years from Standard Chartered Bank (Pakistan) Limited (lead bank), Habib Bank Limited and The Bank of Punjab. During the year the Holding Company has swapped the aforesaid syndicate finance facility into Dubai Islamic Bank limited as aforementioned banks to the extend of balance amount payable that is Rs. 750 million. The facilities is repayable by May 2019.

21.2 The mark-up on above facilities is six months KIBOR plus 0.9% (2014: six-months KIBOR plus 2.5%) per annum, payable semi-annually in arrears. The facility is secured by:

- 1st pari passu mortgage over all present and future immovable assets of the Holding Company with a 25% security margin.

- 1st pari passu charge with 25% security margin over land (and other immovable assets) located at Plot No. 24A/1 & 2A, Delhi Mercantile Muslim Co-operative Housing Society, Block 7 & 8, Main Shahrah-e-Faisal, Karachi.

72


Note 2015 2014 ---- (Rupees in ‘000) ----

22 DEFERRED LIABILITIES

Deferred taxation 22.1 30,174 42,379Staff retirement gratuity - unfunded 37.1 39,810 33,503

69,984 75,882

22.1 The net balance of deferred taxation is in respect of following temporary differences:

Credit balance arising on account of:Property, plant and equipment 32,155 44,773 Surplus on revaluation of property, plant and equipment 20.2 - -

32,155 44,773 Debit balance arising on account of:Intangible assets (1,037) (1,264)Provisions for doubtful debts and doubtful refunds (944) (1,130)

(1,981) (2,394)22.2 30,174 42,379

Provision for deferred taxation has been calculated only to the extent of those temporary differences do not relate to the income falling under Final Tax Regime of the Income Tax Ordinance, 2001.

Note 2015 2014 ---- (Rupees in ‘000) ----

22.2 Balance at beginning of the year 42,379 40,982 Raised/(reversed) during the year - through profit and loss account

35 (12,205) 1,397

Balance at end of the year 22.1 30,174 42,379

23 SHORT-TERM FINANCES - secured

Running finances under mark-up arrangements 23.1 682,334 795,882

23.1 The Holding Company has arranged syndicated running finances under mark-up arrangements of Rs. 1,033 million (2014: Rs. 1,095 million). The mark-up on running finances ranges between 9.5% to 12.42% (2014: 10.53% to 12.39%) per annum. The running finances under mark-up arrangements are secured jointly by registered mortgage of Rs. 210.5 million (2014: Rs. 172.5 million) of immovable property together with joint pari passu charge on all current assets of the Holding Company to the extent of Rs. 1,859 million (2014: Rs. 1,389 million). These short term facilities were arranged through Standard Chartered Bank (Pakistan) Limited from various banks. The securities are held jointly against the short term and long term finances (refer note 21).

A n n u a l R e p o r t 2 0 1 5 73


Note 2015 2014 ---- (Rupees in ‘000) ----

24 TRADE AND OTHER PAYABLES

Creditors 394,961 299,164 Bills payable in foreign currency 264,170 102,009Accrued liabilities 616,477 464,221 Advance from customers 65,637 87,282 Unclaimed dividend 13,594 13,450 Payable under defunct staff retirement benefits scheme 2,612 2,739 Workers’ Profits Participation Fund 24.2 95,736 52,908 Workers’ Welfare Fund 61,308 41,263Sales tax and excise duty payable 933 4,784 Other liabilities 31,317 14,801

1,546,745 1,082,621

24.2 Worker’s Profits Participation Fund

Balance at beginning of the year 52,908 41,707 Contribution for the year 33 94,805 51,976

147,713 93,683 Interest on funds utilized in the Holding Company’s business at 10.44% (2014: 12.65%) 34 3,999 3,816

151,712 97,499 less: Payments made during the year (55,976) (44,591)Balance at end of the year 95,736 52,908

25 ACCRUED MARK-UP

Accrued mark-up on:- long term finances - secured 5,283 9,019 - short-term finances - secured 9,374 26,933

14,657 35,952

26 CONTINGENCIES AND COMMITMENTS

Contingencies

26.1 During the year ended June 30, 2014, the Sindh Revenue Board (SRB) has imposed sales tax on toll manufacturing at the rate of 16% of sales value. The Holding Company has contested the imposition and the Management and the tax advisor are confident that good grounds exist to contest the case. They believe that eventual outcome will come in favour of the Holding Company. Hence no provision has been made in these consolidated financial statements. The case is pending for hearing before the Honourable High Court of Sindh.

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Commitments

26.2 Future rentals payable against operating lease arrangements

The Holding Company obtained factory building at Karachi on rent for a period of 5 years.

2015 2014 ---- (Rupees in ‘000) ----

The details of future rentals over the lease period are as follows: - not later than one year 5,580 1,386 - later than one year and not later than five year 5,883 -

11,463 1,386

26.3 The facility for opening letters of credit (LCs) acceptances and guarantees as at June 30, 2015 amounted to Rs. 1,275 million (2014: Rs. 980 million) of which the amount remaining unutilized as at that date was Rs. 726 million (2014: Rs. 540 million).

2015 2014 ---- (Rupees in ‘000) ----

27 NET SALES

SalesLocal 8,270,308 6,858,543 Export 524,027 366,200

8,794,335 7,224,743

Sales returns & discounts (463,650) (433,897)Sales tax & excise duty (87,193) (118,718)

(550,843) (552,615) 8,243,492 6,672,128

Add: Toll manufacturing 804,549 938,089 Less : Sales tax - (1,623)

804,549 936,466 9,048,041 7,608,594

A n n u a l R e p o r t 2 0 1 5 75


Note 2015 2014 ---- (Rupees in ‘000) ----

28 COST OF SALES

Material consumed Raw and packing material consumed 2,492,808 2,096,991 Processing charges paid to third parties 1,008,919 669,654

3,501,727 2,766,645 Factory expensesSalaries wages and benefits (refer note 28.1) 288,695 278,913 Provision for staff gratuity (unfunded) 3,339 2,572 Provident fund contribution 6,302 6,152 Carriage and duties 13,565 9,912 Fuel, water and power 88,384 74,897 Rent and taxes 3,949 2,115 Communication 1,073 1,005 Stationery and supplies 7,638 2,712 Traveling 13,604 8,858 Advertisement 9,670 787 Entertainment 80 129 Repairs and maintenance 63,617 82,864 Medical expenses 4,060 3,298 Personal training and selection 1,396 238 Vehicle expenses 5,852 6,766 Subscription 162 55 Legal and professional charges 11,663 9,006 Depreciation (refer note 6.4) 45,387 68,572 Insurance 3,151 2,551 Corporate services charged by associated company (refer note 42.2) 7,920 1,440 Sundries 17,694 17,852

597,201 580,694 4,098,928 3,347,339

Work in process at beginning of the year (refer note 12) 58,886 74,309 4,157,814 3,421,648

Work in process at end of the year (refer note 12) (100,148) (58,886)Cost of good manufactured 4,057,666 3,362,762

Finished goods as at the beginning of the year (refer note 12.1) 406,025 235,584 Finished goods purchased 642,218 1,116,288

1,048,243 1,351,872

Cost of samples manufactured (64,388) (93,522)Finished goods as at the end of the year (refer note 12.1) (396,370) (406,025)Cost of sales 4,645,151 4,215,087

28.1 Salaries, wages and benefits include Rs. 84.57 million (2014: Rs. 70.02 million) in respect of contractual labour provided by Paksons (Private) Limited.

76


2015 2014 ---- (Rupees in ‘000) ----

29 SELLING AND DISTRIBUTION EXPENSES

Salaries wages and benefits 553,559 542,395 Provision for staff gratuity (unfunded) 1,904 1,465 Provident fund contribution 18,035 15,419 Services charges 31,201 32,104 Carriage and duties 116,848 110,981 Water and power 26,086 3,383 Rent and taxes 28,242 15,403 Communication 17,113 18,909 Stationery and supplies 7,986 8,179 Traveling 254,657 228,699 Advertising and promotion 394,268 357,122 Samples 76,156 82,757 Bonus to salesmen 133,754 81,131 Entertainment 6,062 2,605 Repairs and maintenance 13,202 3,513 Medical expenses 5,656 7,274 Personal training and selection 22,320 7,777 Vehicle expenses 56,027 91,911 Insurance 11,473 6,562 Depreciation (refer note 6.4) 29,874 8,442 Subscription 20,681 15,651 Donation (refer note 29.1) 5,991 4,666 Replacement products 55,726 53,495 Royalty 5,528 3,919 Corporate services charged by associated company (refer note 42.2) 19,800 3,600 Legal and professional charges 52,626 23,870 Sundries 1,000 870

1,965,775 1,732,102

29.1 The Director of the Company have no interest in donee institution except as stated in note 42.

A n n u a l R e p o r t 2 0 1 5 77


Note 2015 2014 ---- (Rupees in ‘000) ----

30 ADMINISTRATIVE EXPENSES

Salaries wages and benefits 104,509 93,083 Provision for staff gratuity (unfunded) 556 429 Provident fund contribution 2,930 3,103 Carriage and duties 1,783 3,686 Water and power 1,506 1,565 Rent and taxes 8,458 9,228 Communication 6,618 4,701 Stationery and supplies 6,468 5,383 Traveling 16,419 3,206 Advertisement 244 329 Entertainment 209 85 Repairs and maintenance 19,500 18,366 Medical expenses 5,770 5,842 Personal training and selection 2,384 1,134 Vehicle expenses 5,981 5,870 Insurance 3,835 3,388 Depreciation (refer note 6.4) 5,004 4,781 Amortization (refer note 7) 10,757 14,423 Impairment (refer note 7) - 12,129 Subscription 2,856 2,860 Donation (refer note 29.1) 6,108 29,321 Corporate services charged by associated company (refer note 42.2) 12,040 2,241 Legal and professional charges 36,041 32,238 Donation (refer note 29.1) - 1,665 Penalties - 1,821 Sundries 1,259 1,157

261,235 262,034

31 OPERATING PROFIT

Net sales 9,048,041 7,608,594

Cost of sales (4,645,151) (4,215,087)Selling and distribution expenses (1,965,775) (1,732,102)Administrative expenses (261,235) (262,034)

(6,872,161) (6,209,223)

Operating profit 2,175,880 1,399,371

78


Note 2015 2014 ---- (Rupees in ‘000) ----

32 OTHER INCOME

Income from financial assets

Gain on revaluation of financial assets classified as held for trading 17 16 42

Gain on sale of short term investment 5,522 - Interest on loan 4,478 - Exchange gain 13,446 26,281 Reversal of provision for doubtful loans 405 -

23,867 26,323 Income from non-financial assets

Gain on disposal of property, plant and equipment 6.6 19,193 74,322 Others 18,956 8,781

38,149 83,103

Income from non-financial assets - related parties

Rental income against use of operating assets by related parties:

- International Franchises (Private) Limited (associated company) 5,253 8,244

Rental income from investment property 31,113 - 98,382 117,670

33 OTHER EXPENSES

Contribution to: - Workers’ Profits Participation Fund 24.2 94,805 51,976 - Workers’ Welfare Fund 39,652 33,615 - Central Research Fund 11,172 9,678

Auditors’ remuneration 33.1 4,860 3,801 Loss on disposal of property, plant and equipment 6.6 141 724 Exchange loss 21,339 35,184

171,969 134,978

A n n u a l R e p o r t 2 0 1 5 79


Note 2015 2014 ---- (Rupees in ‘000) ----

33.1 Auditors’ remuneration

- Grant Thornton Anjum Rahman - external audit

Audit fee - Annual audit 2,269 1,664 - Half year audit - 550 - Half yearly review 361 348

Fee in respect of special reports and certifications 215 343 Out of pocket expenses 141 175

2,986 3,080

- F.R.A.N.T.S & Co. - external audit

Annual audit 538 366

- BDO Ebrahim & Co. - internal audit

Professional fee 1,336 355 4,860 3,801

34 FINANCE COST

Bank charges 9,401 7,822 Interest on Workers’ Profits Participation Fund 24.2 3,999 3,816 Lease finance charges - 280 Mark-up on long term and running finances 178,891 204,266

192,291 216,184

35 INCOME TAX EXPENSE

Current - For the year 468,633 232,444 - For prior years - 55,981

468,633 288,425

Deferred 22.2 (12,205) 1,397 456,428 289,822

35.1 Charge for the year

For the Holding Company, provisions for current taxation and deferred taxation have been made after considering the implications of section 169 of the Income Tax Ordinance, 2001. Income not covered under final tax regime is provided at the normal basis using the applicable rate of 33% for the tax year 2015 (2014: 34% for the tax year 2014).

For IBL HealthCare Limited, current period income tax represents provision based on section 148 of the Income Tax Ordinance, 2001 @ 5.5% on goods imported during the year.

80


For other subsidiaries, provision for taxation is accounted for in accordance with the provision of Section 153(1)(c) of the Income Tax Ordinance, 2001, wherein tax deducted on contract constitutes final discharge of tax liability.

Note 2015 2014 ---- (Rupees in ‘000) ----

35.2 Reconciliation of tax expense

Profit before income tax 1,908,819 1,165,879

Enacted tax rate 33% 34%

Tax on accounting profit at applicable tax rate 629,910 396,399 Tax effect of:

- difference in method of lease accounting - 654 - permanent differences 61,043 1,146 - temporary differences (21,131) (8,448) - applicability of lower tax rate on certain income (12,911) (3,600) - demand provided and raised during the year - 55,981 - applicability of lower tax rate under final tax regime on

behalf of subsidiary (200,483) (152,310)Tax expense charged on income 456,428 289,822

35.3 Current status of tax assessments

Assessments of the Holding Company for the assessment years 2002-2003, tax years 2004, 2005, 2008, and 2012 are pending before various appellate forums in respect of issues related to certain disallowances.

During the year ended June 30, 2014, an assessment order for the tax year 2012, dated March 10, 2014 under section 122(5A) of Income Tax Ordinance 2001 was passed by Assistant commissioner Inland Revenue (ACIR) against the Holding Company, thereby raising a tax demand of Rs. 369.807 million in respect of certain disallowances. The Holding Company has filed an appeal against the aforementioned order. However, no hearing has been fixed and no set aside order has been received by the Holding Company till year-end.

During the year ended June 30, 2014, assessment order for the tax year 2008, dated October 31, 2013 under section 122(5A) of Income Tax Ordinance 2001 was passed by ACIR against the Holding Company, therby raising a tax demand amounting to Rs. 128.832 million against the Holding Company in respect of certain disallowances. An appeal was filed by the Holding Company against the aforementioned order, however, no hearing has been fixed and no set aside order has been received by the Holding Company till year-end.

During the year, an assessment order for the tax year 2013, dated April 30, 2015 under section 122 (5A) of the Income Tax Ordinace 2001, was passed by ACIR against the Company, thereby raising a tax demand amounting to Rs. 586.7 million agianst the Comapny in respect of certian disallowances. An appeal is filed by the Holding Company against the aforementioned order.

A n n u a l R e p o r t 2 0 1 5 81


Note 2015 2014 ---- (Rupees in ‘000) ----

36 EARNINGS PER SHARE - basic and diluted

36.1 Basic earnings per share

Profit attributable to shareholders of the Holding Company (2014: Restated) - Rupees in thousands 1,372,837 801,638

Weighted average number of shares in thousands (2014: Restated)

85,841 85,841

Earnings per share (2014: Restated) - Rupees 15.99 9.34

36.2 Diluted earning per share

There is no dilution effect on the basic earning per share of the Holding Company as the Holding Company has no convertible dilutive potential ordinary shares outstanding on June 30, 2015.

37 EMPLOYEE BENEFITS

a) Defined benefit plans

37.1 Gratuity scheme - unfunded

37.1.1 General description

The scheme provides for post employee benefits for all unionized employees who complete qualifying period of five years of service with the Group and are entitled to one months’ last drawn basic salary for each completed year of such service.

Annual provision is based on actuarial valuation. The valuation was carried out as at June 30, 2015 by M/s. Sidat Hyder Morshed Associates (Private) Limited, independent actuaries, using the projected unit credit method.

37.1.2 Principal actuarial assumptions 2015 2014 (Percentage per annum)

Following principal actuarial assumptions were used for the valuation:

- Estimated rate of increase in salary of the employees 10 12 - Discount rate 10 12

82


2015 2014 ---- (Rupees in ‘000) ----

37.1.3 Movement in the present value of defined benefit obligation (DBO)

Present value of DBO at the beginning of the year (33,503) (27,821)Current service cost (1,528) (1,236)Interest cost (4,271) (3,230)

(5,799) (4,466)Benefits paid 1,294 1,809 Actuarial loss/(gain) on obligation (1,802) (3,025)Present value of DBO at the end of the year (refer note 37.1.4) (39,810) (33,503)

37.1.4 Movement in the deficit recognized in the balance sheet

Deficit at the beginning of the year (33,503) (27,821)

Expense recognized in profit & loss account (refer note 37.1.5) - current service cost (1,528) (1,236) - net interest (4,271) (3,230)

(5,799) (4,466)Remeasurement - recognized in other comprehensive income: Actuarial (loss)/gain arising due to change in:

- demographic assumptions - (unfavourable)/favourable - (717) - financial assumptions - (unfavourable)/favourable - - - experience adjustment - (losses)/gains (1,802) (2,308)

(1,802) (3,025)

Payment made on behalf of fund 1,294 1,809 Deficit at the end of the year (refer note 37.1.3) (39,810) (33,503)

37.1.5 Amount recognized as expense

Cost of sales 28 3,339 2,572Selling and distribution expenses 29 1,904 1,465 Administrative expenses 30 556 429

5,799 4,466

b) Defined contribution plan

37.4 The Searle Company Limited - Employees Provident Fund (the Fund)

37.4.1 Fund position *

Size of the fund - Rupees in ‘000 469,593 251,971 Cost of investments made - Rupees in ‘000 432,332 246,348 Fair value of investments - Rupees in ‘000 432,332 246,348 Percentage of investments to total assets 92% 98%

A n n u a l R e p o r t 2 0 1 5 83


2015 2014 2015 2014 (Percentage) ---- (Rupees in ‘000) ----

37.4.2 Composition of the Fund *

Term finance certificates 1% 11% 4,994 28,041 Deposits with banks 2% 4% 9,000 9,000 Pakistan Investments Bonds (PIBs) 10% 10% 41,222 26,000 NIT units 16% 24% 67,449 59,585 Investment in mutual fund 8% 5% 36,388 12,345 Equity investment in associated company 63% 46% 273,279 117,000

* These figures have been taken from unaudited financial statements of the Fund for the year ended June 30, 2015.

The investments out of provident fund have been made in accordance with provisions of section 227 of the Companies Ordinance, 1984.

2015 2014 ---- (Rupees in ‘000) ----

37.5 IBL HealthCare Limited - Employees Provident Fund (the Fund)

37.5.1 Fund position **

Size of the fund - Rupees in ‘000 23,567 19,983 Cost of investments made - Rupees in ‘000 22,126 19,000 Fair value of investments - Rupees in ‘000 23,001 19,230 Percentage of investments to total assets 94% 95%


37.5.2 Composition of the Fund **

Deposits with banks 14% 1% 3,126 230 Pakistan Investments Bonds (PIBs) 65% 78% 15,000 15,000 Investment in mutual fund 21% 21% 4,875 4,000

** These figures have been taken from unaudited financial statements of the Fund for the year ended June 30, 2015.

The investments out of provident fund have been made in accordance with provisions of section 227 of the Companies Ordinance, 1984.

84


Note 2015 2014 ---- (Rupees in ‘000) ----

38 CASH GENERATED FROM OPERATIONS AFTER WORKING CAPITAL CHANGES

Profit before tax 1,908,819 1,165,879

Adjustments for non-cash items:

Depreciation 6.4 80,265 81,795 Gain on disposal of property, plant and equipment - net 6.6 (19,052) (73,598)Amortization of intangible assets 7 10,757 14,423 Impairment of intangible assets 7 - 12,129 Gain on revaluation of financial assets classified

as held for trading 32 (16) (42)Financial charges excluding bank charges 34 182,890 208,362 Provision for staff retirement gratuity 37.1.4 & 37.1.4 5,799 4,466 Net changes in working capital 38.1 (861,559) (388,751)Share of loss from associate 1,183 -

1,309,086 1,024,663

38.1 Net changes in working capital

Change in stores and spares - 1,182 Change in stock-in-trade (208,980) (290,078)Change in trade debts (732,297) (252,076)Change in trade deposits and short term prepayments (19,774) (24,129)Change in long-term loans (97,824) 89 Change in short-term loans and advances (123,114) (109,627)Change in long-term deposits - 4,647 Change in other receivables (143,983) 168,776

(1,325,972) (501,216)Change in trade and other payables 464,413 112,465 Net changes in working capital (861,559) (388,751)

39 CASH AND CASH EQUIVALENTS

Cash and bank balances 152,876 106,799 Running finances under mark-up arrangements (682,334) (795,882)

(529,458) (689,083)

40 SEGMENT INFORMATION

A segment is a distinguishable component of the Group that is engaged in business activities from which the Group earns revenues and incurs expenses and its results are regularly reviewed by the Group’s Chief Operating Decision Maker to make decision about resources to be allocated to the segment and assess its performance. Further, discrete financial information is available for each segment.

A n n u a l R e p o r t 2 0 1 5 85


Based on internal management reporting structure and products produced and sold, the Group is organised into the following three operating segments:

- Pharma- Consumer- Investment property

Management monitors the operating results of above mentioned segments separately for the purpose of making decisions about resources to be allocated and for assessing performance.

Segment revenue, segment result, costs, assets and liabilities for the year are as follows:

Pharma Consumer Investment property Total 2015 2014 2015 2014 2015 2014 2015 2014 --------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------

40.1 Segment result and performance

Segment revenue 8,116,778 6,852,234 931,263 756,360 31,113 - 9,079,154 7,608,594

Cost of sales (4,115,824) (3,773,895) (529,327) (441,192) - - (4,645,151) (4,215,087)Selling and distribution (1,803,466) (1,510,834) (93,563) (221,268) (68,746) - (1,965,775) (1,732,102)Administrative expenses (261,235) (236,383) - (25,651) - - (261,235) (262,034)

(6,180,525) (5,521,112) (622,890) (688,111) (68,746) - (6,872,161) (6,209,223)Segment result 1,936,253 1,331,122 308,373 68,249 (37,633) - 2,206,993 1,399,371

40.2 Unallocated income and expense Other income 67,269 117,670 Other expenses (171,969) (134,978)Share of loss from associates (1,183) -Financial cost (192,291) (216,184)Profit before taxation 1,908,819 1,165,879 Income tax expense (456,428) (289,822)Profit for the year 1,452,391 876,057

40.3 Segment assets and liabilities

Segment assets 144,603 169,185 25,280 25,280 2,614,906 2,516,865 2,784,789 2,711,330 Unallocated assets 5,595,189 3,947,094 Total assets 8,379,978 6,658,424

Segment liabilities - - - - 750,000 825,000 750,000 825,000 Unallocated liabilities 2,313,720 1,990,337 Total liabilities 3,063,720 2,815,337

40.4 Depreciation 69,826 71,356 10,439 10,439 - - 80,265 81,795

40.5 Other non-cash expenses 10,757 14,423 - - - - 10,757 14,423

40.6 Addition in segment assets 57,202 79,236 8,717 11,711 122,991 203,879 188,910 294,826

40.7 Percentage for allocation 87% 87% 13% 13% 0% 0% 100% 100%

40.8 There were no inter-segment transactions during the year (2014: None).

86


40.9.1 The Group has presented the net sales amounts for the current and comparative prior year.

40.10 The Group has earned major revenue from one of the customer. Net sales to the customer amounts to Rs. 6.61 billion (2014: Rs. 5.67 billion) out of the net sales.

41 REMUNERATION OF THE CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVES

2015 2014 Chief

Executive Officer

Directors Executives*Chief

Executive Officer

Directors Executives*

------------------------------------ (Rupees in ‘000) ------------------------------------

Managerial remuneration 4,577 22,553 100,511 5,428 10,197 112,356

Annual bonus 710 2,709 15,095 691 1,994 17,721

Leave fare assistance - 231 447 - - 361

Retirement benefits

- Provident fund 458 2,255 10,040 563 1,020 11,205

Perquisites

- Rent 2,060 10,149 45,230 2,533 4,589 50,560

- Utilities 458 2,255 10,051 563 1,020 11,235

- Telephone - - 156 - - 174

- Entertainment - - 271 - - 297

- Car maintenance 201 472 4,116 179 606 3,368 8,464 40,624 185,917 9,957 19,426 207,277

Number of persons 1 3 96 1 3 97

2015 2014 40.9 Geographical segments Note ---- (Rupees in ‘000) ----

Net sales by region

Pakistan 8,596,596 7,294,744 Asia 231,176 140,128 Eastern Africa 10,341 2,606 South-Eastern Asia 55,571 32,530 Far East 166,950 138,586 Western Asia 18,520 -

40.9.1 9,079,154 7,608,594

The geographical segment has been categorized using United Nation’s composition of macro geographical (continental) regions.

A n n u a l R e p o r t 2 0 1 5 87


41.1 In addition to the above, the Chief Executive Officer and some of the executives have been provided with free use of the company maintained cars. Further, medical expenses are reimbursed in accordance with the Group’s policies.

41.2 During the year, the Holding Company has paid to five non-executive working directors (2014: five) an aggregate amount of Rs. 182,000 (2014: Rs. 120,000) as fee for attending board meetings.

* Executive means an employee other than chief executive officer and director, whose basic salary exceeds five hundred thousand rupees in a financial year.

42 TRANSACTIONS WITH RELATED PARTIES

The related parties comprises International Brands (Private) Limited (ultimate holding company), associated companies, related group companies, key management personnel, compensation to key management personnel, retirement benefit plan, companies in which directors are common or a director hold office and close family members.

42.1 Aggregate transactions and balances with related parties and associated undertakings which are not disclosed in respective notes are as follows:

2015 2014 Associates/

Group companies/ holding and subsidiary company/

close family members

Directors Key

management personnel

Associates/ Group

companies/ holding and subsidiary company/


Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

42.1.1 Transactions

(i) International Brands LimitedInterest on loan 4,478 - - - - - Corporate expense 6,000 - - - - -

(ii) IBL Operations (Private) Limited - associated company (refer note 42.2 and 42.3)

Sales 7,436,437 - -

5,787,387 - - Sales returned 66,261 - - 122,912 - -

Expenses claimed by the associated company

Carriage and duties 34,106 - - 21,200 - - Staff salaries and benefits 1,678 - - 4,287 - - Discounts 168,691 - - 101,222 - - Warehouse rent 5,546 - - 3,874 - - Mark-up expenses - - - - - - Corporate services charged 39,600 - - 7,200 - - Sales promotion expenses 7,206 - - 66,632 - - IT Services 2,802 - - 6,600 - -

Expenses claimed by the Group Staff salaries and other expenses 1,278 - - 5,465 - - Royalty and price difference claims 19,387 - - - - -

88





Directors Key


Associates/ Group



Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

(iii) International Franchises (Private) Limited - associated companySales 325 - - 677 - - Sales return 69 - - - - - Rent, utility and other income 9,286 - - 3,295 - - Staff salaries and benefits - - - 1,123 - - Purchase of promotional items 201 - - 808 - -

Expenses claimed by the CompanyUtilities expenses (Building center) 569 - - - - -

(iv) United Distributors Pakistan Limited (UDPL) - associated companyPurchase of vehicles 2,010 - - - - - Payment under group tax relief 11,558 - - - - - Expenses claimed by the Company Vehicle hiring/ insurance 10 - - - - - Warehouse rent & expenses 686 - - 625 - - Staff salaries and benefits - - - 122 - -

(v) HABITT - associateSales 6,907 - - - - - Sales return 580 Purchase of promotional items 558 - - 775 - - Rental income 30,053 - - 4,990 - -

(vi) The Citizens Foundation - associate (refer note 42.4)Donations - - - 15,000 - -

(vii) Arshad Shahid Abdulla (Private) Limited - associated companyArchitect fee 2,980 - - 1,260 - -

A n n u a l R e p o r t 2 0 1 5 89





Directors Key


Associates/ Group



Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

(viii) Shahid Abdulla Office and factories renovation 373 - - - - -

(ix) Multinet Pakistan (Private) Limited - associated companyInternet services 452 - - 760 - -

(x) United Brands Limited - associated company

Sales 71,555 - - 84,927 - - Sales returns 461 - - - - -

Expenses claimed by United Brands Limited

Discounts 944 - - 1,563 - - Purchase of promotional items 777 - - 585 - -

Professional fee - 24,500 - - - -

42.1.2 Balances

(i) Loans and advances

At beginning of the year - - 3,604 - - 3,458 Given during the year 4,478 - 7,529 - - 4,043 Repaid during the year - - (3,859) - - (3,897)At the end of the year 4,478 - 7,274 - - 3,604

(ii) Trade debts - associated company (refer note 13)

At beginning of the year 1,414,832 - - 1,201,444 - - Addition during the year 7,363,441 - - 5,811,242 - - Repaid during the year (6,728,418) - - (5,597,854) - - At the end of the year 2,049,855 - - 1,414,832 - -

(iii) Other receivables - associates (refer note 16)

At beginning of the year 41,292 - - 107,490 - - Addition during the year 19,387 - - 5,465 - - Repaid during the year (23,036) - - (71,663) - - At the end of the year 37,643 - - 41,292 - -

(iv) Accrued liabilities - associates (refer note 24)

At beginning of the year - - - 612 - - Addition during the year - - - 9,795 - - Repaid during the year - - - (10,407) - - At the end of the year - - - - - -

42.2 In pursuance of scheme of arrangement and court order dated May 2011, with effect from July 1, 2011 all assets (except for retained assets), liabilities and operation division of International Brands (Private) Limited (ultimate holding company) were transferred to IBL Operations (Private) Limited (associated company).

90


42.3 Sales to IBL Operations (Private) Limited (associated company) are made at ex-factory price i.e. trade prices less distributor’s margin of 10% and 12% (2014: 10% and 12%). In addition, the amounts of communication, utilities, salaries and wages and carriage and duties are also being reimbursed.

42.4 The Chairman of the Holding Company is on the board of directors of the donee. The address of the donee is Plot No. 20, Sector - 14, Near Brookes Roundabout, Korangi Industrial Area, Karachi.

43 PLANT CAPACITIES AND ACTUAL PRODUCTION

The capacity and production of the Holding Company’s plants are indeterminable as these are multi-product and involve varying processes of manufacturing.

44 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

Financial risk management

The board of directors of the Holding Company has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group has exposure to the following risks from its use of financial instruments:

- Credit risk - Liquidity risk - Market risk

44.1 Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss, without taking into account the fair value of any collateral. Concentration of credit risk arises when a number of counterparties are engaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economics, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.

Credit risk of the Group arises principally from the trade debts, loans and advances, trade deposits and other receivables and balances with banks. The carrying amount of financial assets represents the maximum credit exposure. To reduce the exposure to credit risk, the Group has developed a formal approval process whereby credit limits are applied to its customers. The management continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery.

The maximum exposure to credit risk at the reporting date is as follows:

Note 2015 2014 ---- (Rupees in ‘000) ----

Loans and advances 14 149,549 46,477 Long term deposit 11 1,598 1,598 Trade debts 13 2,434,515 1,702,218 Trade deposits 15 45,723 40,972 Other receivables 16 205,761 53,768 Balance with banks 18 51,398 105,440

2,888,544 1,950,473

A n n u a l R e p o r t 2 0 1 5 91


Concentration of credit risk

The Group’s major sales are with IBL Operations (Private) Limited, which is a concentration and a credit risk. However, the Group has established policies and procedures for timely recovery of trade debts. With respect to parties other than affiliates, the Group mitigates its exposure and credit risk by applying credit limits to its customers.

Out of the total financial assets of Rs. 3.28 billion (2014: Rs. 1.99 billion), financial assets which are subject to credit risk amount to Rs. 2.89 billion (2014: Rs. 1.95 billion). Moreover, financial assets amounting to Rs. 4.31 billion (2014: Rs. 2.88 billion) consist of receivables from the Group’s affiliates and cash and bank balances.

44.2 Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Group could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Grouop’s reputation. The following are the contractual maturities of financial assets and financial liabilities:

2015

Effective interest

rate

Interest / mark-up bearing Non-interest / mark-up bearing

Total Maturity up to one year

Maturity after one year Subtotal Maturity up to

one yearMaturity after

one year Subtotal

Note % -------------------------------------------- (Rupees in ‘000) --------------------------------------------

Financial assets

Loans and advances 14 - - - 314,660 - 314,660 314,660 Deposits 11 - - - 1,598 1,598 1,598 Trade debts 13 - - - 2,434,515 - 2,434,515 2,434,515 Trade deposits 15 - - - 45,723 - 45,723 45,723 Other receivables 16 - - - 205,761 - 205,761 205,761 Cash and bank balances 18 3.5 21,386 - 21,386 131,490 - 131,490 152,876

21,386 - 21,386 3,132,149 1,598 3,133,747 3,155,133 Financial liabilities

Long-term finance 21 KIBOR plus 0.9 (107,143) (642,857) (750,000) - - - -

- Trade and other payables 24 - - - (1,546,745) - (1,546,745) (1,546,745)Accrued mark-up 25 (14,657) - (14,657) - - - (14,657)Short-term finances 23 9.5 to

12.42 (682,334) - (682,334) - - - (682,334)

(804,134) (642,857) (1,446,991) (1,546,745) - (1,546,745) (2,243,736)On balance sheet date gap (782,748) (642,857) (1,425,605) 1,585,404 1,598 1,587,002 911,397

92


2014

Effective interest

rate



Maturity after one year Subtotal Maturity up to

one yearMaturity after

one year Subtotal

Note % -------------------------------------------- (Rupees in ‘000) --------------------------------------------Financial assets

Loans and advances 14 - - - 45,599 878 46,477 46,477 Deposits 11 - - - - 1,598 1,598 1,598 Trade debts 13 - - - 1,702,218 - 1,702,218 1,702,218 Trade deposits 15 - - - 40,972 - 40,972 40,972 Other receivables 16 - - - 53,768 - 53,768 53,768 Cash and bank balances 18 6 12 - 12 106,787 - 106,787 106,799

12 - 12 1,949,344 2,476 1,951,820 1,951,832 Financial liabilities

Long-term finance 21 KIBOR plus 2.5 (150,000) (675,000) (825,000) - - - (825,000)

Liabilities against assets subject to finance leases

Trade and other payables 24 - - - (896,384) - (896,384) (896,384)Accrued mark-up 25 - - - (35,952) - (35,952) (35,952)Short-term finances 23

10.53-12.39 (795,882) - (795,882) - - - (795,882) (945,882) (675,000) (1,620,882) (932,336) - (932,336) (2,553,218)

On balance sheet date gap (945,870) (675,000) (1,620,870) 1,017,008 2,476 1,019,484 (601,386)

44.3 Market risk

Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to a change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of securities and liquidity in the market. The Group is exposed to currency risk and interest rate risk only.

44.3.1 Currency risk

Currency risk is the risk that the value of financial asset or a liability will fluctuate due to a change in foreign exchange rates. It arises mainly where receivables and payables exist due to transactions entered into foreign currencies.

The Group is exposed to currency risk on purchases that are entered in a currency other than Pak Rupees. Payable exposed to foreign currency risk have been included in creditors/bills payable, which year-end are Rs. 394 million (2014: Rs. 102 million) and foreign currency receivable included in trade debtors are Rs. 60.46 million (2014: Rs. 57.7 million). The Group earned exchange gain of Rs. 13.4 million (2014: Rs. 26.3 million) and suffered exchange loss of Rs. 21.3 million (2014: Rs. 34.2 million) during the year.

A n n u a l R e p o r t 2 0 1 5 93


44.3.2 Interest rate risk

Interest rate risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Majority of the interest rate exposure arises from long term finance and short term finance. At the balance sheet date the interest rate profile of the Group’s mark-up bearing financial instruments is as follows:

Note 2015 2014 ---- (Rupees in ‘000) ----

Variable rate instruments

Financial liabilities - Long term finance 21 (750,000) (825,000)- Short term finance 23 (682,334) (795,882)

(1,432,334) (1,620,882)

Cash flow sensitivity for variable rate instruments

A change of 100 basis points (bp) in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amount shown below. This analysis assumes that all other variables, in particular foreign currency rates remain constant. The analysis is performed on the same basis for 2014.

Profit and loss Equity100 bp increase

100 bp decrease

100 bp increase

100 bp decrease

------------------- (Rupees in ‘000) -------------------

As at June 30, 2015 Cash flow sensitivity - variable rate instruments 1,789 (1,789) 1,789 (1,789)

As at June 30, 2014Cash flow sensitivity - variable rate instruments 2,045 (2,045) 2,045 (2,045)

45 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the amount at which an asset could be exchanged or liability settled between knowledgeable willing parties in an arm’s length transaction. The Group prepares its consolidated financial statements under the historical cost convention and where applicable at fair value and amortized cost. Estimated fair value of all financial instruments are not significantly different from their carrying values on June 30, 2014.

94


Note 2015 2014 ---- (Rupees in ‘000) ----

46 FINANCIAL INSTRUMENTS BY CATEGORY

46.1 Financial liabilities

Financial liabilities measured at amortized costLong-term finances 21 (642,857) (825,000)Trade and other payables 24 (1,546,745) (896,384)Short-term finances 23 (682,334) (795,882)Financial liabilities measured at fair value through profit or lossAccrued mark-up 25 (14,657) (35,952)

(2,886,593) (2,553,218)46.2 Financial assets

Loans and receivablesLoans and advances 14 314,660 46,477 Long term deposit 11 1,598 1,598 Trade debts 13 2,434,515 1,702,218 Trade deposits 15 45,723 40,972 Other receivables 16 205,761 53,768 Cash and bank balances 18 152,876 106,799

3,155,133 1,951,832 Financial assets measured at fair value through profit or lossShort term investment 17 126,929 41,042

3,282,062 1,992,874 On balance sheet gap 395,469 (560,344)

47 NUMBER OF EMPLOYEES 2015 2014

Number of employees as at the year end 1,555 1,471

Average number of employees during the year 1,466 1,516

A n n u a l R e p o r t 2 0 1 5 95


48 DATE OF AUTHORIZATION FOR ISSUE

These consolidated financial statements were authorized for issue by the Board of Directors on September 30, 2015.

48.1 Event after balance sheet date

48.1.1 The Board of Directors of the Holding Company in the meeting held on September 30, 2015 has approved the following appropriation:

2015 2014 ---- (Rupees in ‘000) ----

- Cash dividend - Rs. 2 (2014: Nil) per share of Rs. 10 each 171,681 -

- Issue of bonus shares 20% (2014: 40%) in the ratio of 20 (2014: 40) shares for every 100 shares held 171,681 245,259

The Board of Directors of the IBL HealthCare Limited in the meeting held on September 29, 2015 has approved the following appropriation:

- Cash dividend - Rs. 2 (2014: Rs. 1) per share of Rs. 10 each 59,800 23,000

- Issue of bonus shares 20 % (2014: 30%) in the ratio of 20 (2014: 30) shares for every 100 shares held 59,800 69,000

These would be recognized as a liability in the Group’s financial statements in the year in which such dividends are approved.

48.1.2 The Board of Directors of the Holding Company has also approved 10 right shares for every 100 shares held i.e. 10% at a premium of Rs. 190 per share.

The Board of Directors of IBL HealthCare Limited has also approved 10 right shares for every 100 shares held i.e. 10% at a premium of Rs. 40 per share.



96

Director ’s Report 98

Auditors’ Report to the Members of the Searle Company Limited 104

Unconsolidated Balance Sheet 106

Unconsolidated Profit and Loss Account 107

Unconsolidated Statement of Comprehensive Income 108

Unconsolidated Statement of Cash Flows 109

Unconsolidated Statement of Changes In Equity 110

Notes to the Unconsolidated Financial Statements 111

Contents

UnconsolidatedFinancialStatements

A n n u a l R e p o r t 2 0 1 5 97

Health is a crucially important social and economic asset – a cornerstone for human development. Throughout the country and throughout the rapidly increasing cross border destinations, people rely on Searle, the new destination of possibilities, to help them get healthy throughout their lives. We at Searle believe each individual has the right to live life at the highest magnitude. Today, Searle is helping more people in ample ways than before. We are working in every possible means to ensure that every single individual has access to adequate healthcare solutions in every given circumstance.

We are focused in building a new Searle for the 21st century, with market leading brands and targeted innovations. The year 2015, which embarked the 50th year of our presence in the country, was yet again an outstanding year for the patients we serve and for our shareholders, one that clearly demonstrated how we will compete and succeed in the years ahead.

2015 2014PKR in thousand

Revenue 7,582,470 6,071,823

Gross profit 3,332,300 2,477,181

Gross profit percentage 43.9% 40.8%

Operating expenses 2,032,208 1,779,765

Operating expenses percentage 26.8% 29.3%

Operating profit 1,300,092 697,416

Operating profit percentage 17.1% 11.5%

Other income 805,676 593,049

Profit before taxation 1,767,664 958,120

Profit after taxation 1,405,413 753,225

Profit after taxation percentage 18.5% 12.4%

The Directors take pleasure in presenting the annual report together with the audited financial statements of the company for the year ended June 30, 2015.

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984. The Directors’ Report has been prepared in accordance with section 236 of the Companies Ordinance, 1984 and clause xvi of the Code of Corporate Governance 2012.

This report is to be submitted to the members at the 50th Annual General Meeting of the Company to be held on October 29, 2015.

Operating results

We believe that the key to growth is the introduction of higher dimensions of consciousness into our awareness. Durable growth-and-income investment, delivering top-tier growth and steady margin expansion, with strong cash flow and increasing returns to shareholders is a concern of paramount importance to us.

During 2015, we made decisions and took actions that enabled us to allocate our resources in ways that enhanced shareholder value.

At the end of June 2015, Searle reported revenue of 7.6 billion, corresponding to a growth of impressive 24.9% compared with the preceding year. The gross margins stood at 43.9% against 40.8% reported last year.

The double digit revenue growth is a result of domestic volume growth due to expanding doctor coverage coupled with the price increase made during the later part of the last year.The operating cost as a percentage of revenue decreased to


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26.8% from 29.31% reflecting tighter control over spendings.

Our past investments in our subsidiaries have started paying off the Company in terms of healthy dividends and helped in achieving overall tax efficiencies due to no tax on the same under the group structure.

Earnings per share

Basic earnings per share after taxation were Rs. 16.37 (2014: Rs. 8.77).

There is no dilution effect on the basic earnings per share of the Company, as the Company has no convertible dilutive potential ordinary shares outstanding as at June 30, 2015.

4.31 4.41

6.18.77

16.37

0

5

10

15

20

20152014201320122011

Dividend and Right Issue

The board of directors have recommended cash and stock dividend of 20%, for the year ended June 30, 2015, against the stock dividend of 40% in June 2014. Further, in addition, the board of directors have also recommended to offer 10% right shares at a premium of Rs.190 per share in proportion of 10 shares for every 100 shares held.

Financial statements and auditors

The financial statements of the company have been audited and approved without qualification by the auditors, Grant Thornton Anjum Rahman, Chartered Accountants [previously, Grant Thornton Anjum Asim Shahid Rahman, Chartered Accountants].

Further, the present auditors, Grant Thornton Anjum Rahman, Chartered Accountants, retired and being eligible, offer themselves for re-appointment. The Board of Directors endorses recommendation of the Audit Committee for their re-appointment as Auditors of the Company for the year ending June 30, 2016, at a fee to be mutually agreed.

Shareholding information

The Company’s shares are traded on the Karachi Stock Exchange and Islamabad Stock Exchange. The shareholding information as of June 30, 2015 and other related information

is set out on pages 157 to 160 of the Financial Report. The Directors, CEO, Company Secretary and CFO, their spouses and minor children did not carry out any trade in the shares of the Company except the following:

NameShares

PurchasedShares

Disposed

Mrs. Shakila Rashid 294,000 291,500

Mr. Shahid Abdulla 139,900 -

Product innovation

We believe that, beyond innovation, we hold a wider responsibility to ‘act vigilantly,’ by acting with integrity, complying with national laws, respecting human rights, applying fair labour norms, protecting the environment, and working against corruption to prevent harm to people, communities and future generations.

We are actively engaged in innovating products, so as to ensure a balanced business for the future, augmenting shareholders value and providing affordable healthcare solutions to the patients. The company is continuously exploring new ways of doing business through identification of new channels and geographies for business expansion and external alliances and partnerships.

Product quality

We believe, the main responsibility for ensuring public health does not only lie with governments and national institutions. We also have the duty to respect, protect and fulfill the right to health progressively, within every possible means. We should do our best to ensure availability, accessibility, acceptability and quality of health services – including reforming current healthcare systems to positively impact the health of the poor.

We are committed to our duty towards safeguarding the patient’s well-being, by assuring that all operations associated with the manufacture of a medicinal product are of a standard that assures the patient’s expectations of safety and efficacy. Our products carry a promise of Quality and we take issues related to the quality of our products very seriously.

Pharmaceutical industry is a vital segment of health care system bearing many inherent risks. In line with the above philosophy, we recognise that any mistake in product design or production can be severe, even fatal, therefore, the maintenance of quality with continuous improvement is Searle’s utmost priority and moral responsibility.

Corporate and social responsibility

Goodness is the only investment that never fails. Creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success

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At Searle, our aim has always been to make useful contributions to the economy we operate in. One of the primary areas of focus has been the creation of employment opportunities to support a large industrial and sales workforce. The company operates in a socially responsible manner. Accordingly, the company’s CSR program has a very wide scope encompassing initiatives in the areas of healthcare, education, environment protection, water and sanitation, child welfare, infrastructure development and other social welfare activities.

Occupational health and safety

We believe, at the end of the day, the goals are simple, safety and security. All workers have the right to return home each day safe and sound. We at Searle, recognise the importance of safe and secure environment and consider it our duty to ensure that people who work for us know how to work safely and without risks to health and to develop a positive health and safety culture.

The health and safety of our employees and visitors is a high priority for The Company. Therefore, hazards associated with operations are continuously identified, assessed and managed to eliminate or reduce risks.

Information technology

In line with our continuous endeavours to regularly upgrade information systems we continued with our policy to invest more and more in information technology (IT) and to upgrade related infrastructure, thereby continuously improving and enhancing both qualitative and quantitative aspects of management reporting including decision making processes.

The coming major investment which we have planned is the implementation of most powerful business management system ‘SAP’. The said investment is being carried out to cater the growing business needs of the company.

Website

All our stakeholders and general public can visit The Searle Company Limited’s website, www.searlecompany.com, which has a dedicated section for investors containing information related to annual, half yearly and quarterly financial statements.

Related party transactions

All related party transactions, during the year 2015, were placed before the audit committee and the board for their review and approval. These transactions were duly approved by the Audit Committee and the Board in their respective meetings. All these transactions were in line with the transfer pricing methods and the policy with related parties approved

by the board previously. The company also maintains a full record of all such transactions, along with the terms and conditions. For further details please refer note 39 to the financial statements.

Compliance with the Code of Corporate Governance

The stock exchanges have included in their Listing Rules, the Code of Corporate Governance (Code) issued by the Securities & Exchange Commission of Pakistan. The company has adopted the code and is implementing the same in letter and spirit.

Directors’ training program

Board of directors training helps the board fulfil its role and make a real difference to a company’s performance. It takes a practical and pragmatic approach – because every board has a unique role in company oversight including duty to stakeholders. Therefore, keeping the same in mind and the requirements of the code two Directors namely Mr. Asad Abdulla and Mr. S. Nadeem Ahmed attended the directors’ training program conducted by Institute of Chartered Accountants of Pakistan during the year.

Code of conduct

The Board of Directors of the Company has adopted a code of conduct. All employees are informed and aware of this and are required to observe these rules of conduct in relation to business and regulations.

Corporate and financial reporting framework

• The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

• Proper books of accounts of the Company have been maintained.

• Appropriate accounting policies have been consistently applied in preparation of the financial statements and accounting estimates are based on reasonable and prudent judgment.

• International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

• The Company maintains a sound internal control system which gives reasonable assurance against any material misstatement or loss. The internal control system is regularly reviewed.


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• There are no significant doubts upon the Company’s ability to continue as a going concern.

• There has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations.

• There has been no departure from the best practices of transfer pricing.

• The key operating and financial data for the six years is tabulated as follows:

2015 2014 2013 2012 2011 2010

ASSETS EMPLOYED

Property, plant and equipment 687,332 558,306 576,639 2,664,973 710,883 619,481

Intangible assets 30,642 33,572 39,008 43,030 52,112 8,505

Investment property 2,491,318 2,393,277 2,189,398 - - -

Long-term investment 519,091 359,900 100,800 100,000 100,000 100,000

Long-term loans, deposits & prepayments 2,044 2,100 7,027 6,771 7,468 7,430

Net current assets 1,827,051 715,954 671,708 397,114 1,053,193 915,456

Total assets employed 5,557,478 4,063,109 3,584,580 3,211,888 1,923,656 1,650,872

FINANCED BY

Issued, subscribed and paid-up capital 858,407 613,148 471,652 336,895 306,268 306,268

Reserves and Unappropriated profit 3,689,268 2,530,916 1,999,685 1,627,614 1,346,299 1,027,278

Shareholder's equity 4,547,675 3,144,064 2,471,337 1,964,509 1,652,567 1,333,546

Surplus on revaluation of fixed assets 296,961 168,163 185,020 201,589 179,901 207,484

Long-term and deferred liabilities 712,842 750,882 928,223 1,045,790 91,188 109,842

Total capital employed 5,557,478 4,063,109 3,584,580 3,211,888 1,923,656 1,650,872

Turnover 7,582,470 6,071,823 5,149,798 4,936,049 4,238,840 3,702,518

Profit before tax 1,767,664 958,120 752,976 557,977 509,221 543,494

Profit after tax 1,405,413 753,225 523,274 378,391 367,959 357,164

% of turnover 18.54 12.41 10.16 7.67 8.68 9.65

% of capital employed 25.29 18.54 14.60 11.78 19.13 21.63

Dividends

Cash (%) 20 - 20 10 15 30

Stock (%) 20 40 30 40 10 -

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Audit committee

The Committee comprises of three non-executive directors. During the year, four meetings of audit committee were held, the details of which are as follows:


Mr. Husain Lawai 3

Mr. Asad Abdulla 4


Meetings of the board of directors

During the year, five meetings of the Board of Directors were held as follows:


Mr. Rashid Abdulla 5


Mr. Zubair Palwala 5

Mr. Munis Abdullah 2

Mr. Asad Abdulla 5

Mr. Ayaz Abdulla 5

Mr. Adnan Asdar Ali 4

Mr. Husain Lawai 4

Mrs. Faiza Naeem 4

During the year, Mr. Shahid Abdulla was appointed on the board in place of Mr. Munis Abdulla, however, he did not attended any meeting.

Human resource and remuneration committee

The Committee comprises of following three members two of them are non-executive Directors including the Chairman of the Committee.

Mr. Asad Abdulla - ChairmanMr. Rashid AbdullaMr. Ayaz Abdulla

Subsequent events

No material changes or commitments affecting the financial position of the Company have occurred between the end of

the financial year of the Company and the date of this report.

Value of investments of provident funds

The value of investment of provident fund based on their un-audited / audited accounts as on June 30, 2015 and June 30, 2014 respectively was as follows:

2015 2014

PKR in thousand

Provident Fund 432,332 246,348

Consolidated performance

In compliance with section 236(5) of the companies Ordinance, 1984 we give below the following information:

Annual consolidated financial statements are attached.Relevant financial information of the Group for last four years appears as under:

2015 2014 2013 2012

PKR in million

Turnover 9,048 7,609 6,014 5,659

Operating profit 2,176 1,399 1,266 977

Profit after taxation 1,452 876 719 432

Total assets 8,380 6,658 5,477 5,294

Share capital and reserves 5019 3,675 2,894 2,217Consolidated earnings per share (Rupees) 15.99 9.34 10.91 6.40

Future outlook

The future outlook of the market is pretty much bright owing to changing macroeconomic and socioeconomic indicators. The recent drive by authorities, to improve and tighten regulation on Pharmaceutical manufacturing and marketing, is expected to clean the market of many substandard and spurious drugs and in process improve the confidence of Physicians and Patients. In totality the market will gain its lost share and growth as many spurious drugs and counterfeit are being apprehended and substandard manufacturers being fined. Searle is regarded very high on its commitment to premium quality, unmatched efficacy and its Socially Responsible Stance evident by many of project heavily funded by Searle.


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We are in almost all high-density therapeutic avenues such as Cardiovascular, Diabetes, Orthopedics, Neurology, and Pediatrics and are constantly increasing our presence in other therapeutic areas such as Antibiotics, Gastroenterology, Pulmonology, Virology and Oncology.

Developments in medical technology have long been confined to procedural or pharmaceutical advances, while neglecting a most basic and essential component of medicine: patient information management. Searle is also continuously developing and educating its sales force to ensure the same.

Support to different NGOs and contribution in unforeseen calamities will continue as a regular commitment to the nation of Pakistan.

We must become bigger than we have been: more courageous, greater in spirit, larger in outlook. We are more confident than ever that Searle is well placed to succeed in emerging markets. Searle is planning to align with global trends including an ongoing population growth, rising demand of generic branded pharmaceuticals and nutritional products. Searle will aggressively focus on the global market and will primarily focus to expand the business operation in existing export countries while looking to penetrate into new countries as well.

The company sees huge potential for the infusion business therefore we are planning to expand its current production capacity and by diversification into a portfolio of IV sets and accessories.

Globally there is a significant shift in R&D from conventional pharmaceutical to Biotechnology product. So as in Pakistan, we having a purpose built, FDA complaint state of art manufacturing facility in which we intent to produce biological products for Oncology, Rheumatology, Nephrology & Virology for local & international markets.

When people are emotionally motivated, they contribute and same is the case with all our employees, partners, suppliers and customers, for which we are thankful and expect the same zeal and zest for their contribution in future.

For and on behalf of the board

Karachi: Rashid AbdullaSeptember 30, 2015 Chief Executive Officer

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Independent Auditors’ Report to the Members of The Searle Company LimitedWe have audited the annexed unconsolidated balance sheet of The Searle Company Limited (the Company)as at June 30, 2015 and the related unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated statement of changes in equity and unconsolidated statement of cash flows together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these unconsolidated statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:

a) in our opinion, proper books of accounts have been kept by the Company as required by the Companies Ordinance, 1984;

b) in our opinion;

i) the unconsolidated balance sheet and unconsolidated profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied;

ii) the expenditure incurred during the year was for the purpose of the Company’s business; and

iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;

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c) in our opinion and to the best of our information and according to the explanations given to us, the unconsolidated balance sheet, unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated statement of changes in equity and unconsolidated statement of cash flows together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company’s affairs as at June 30, 2015 and of the profit, its comprehensive income, its cash flows and changes in equity for the year then ended; and

d) in our opinion Zakat was not deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

Karachi. Grant Thornton Anjum RahmanDate: September 30, 2015 Chartered Accountants

Khaliq-ur-Rahman

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Unconsolidated Balance Sheet As at June 30, 2015



Note 2015 2014 --------- (Rupees in ‘000) ---------

ASSETS

Non-current assets Fixed assets - Property, plant and equipment 5 687,332 558,306 - Intangible assets 6 30,642 33,572

717,974 591,878 Investment property 7 2,491,318 2,393,277 Long-term investments 8 519,091 359,900 Long-term loans 9 446 502 Long-term deposits 10 1,598 1,598

Total non-current assets 3,730,427 3,347,155

Current assets Stores and spares 1,004 1,004 Stock-in-trade 11 1,016,154 804,579 Trade debts 12 2,182,838 1,462,656 Loans and advances 13 352,331 144,837 Trade deposits and short-term prepayments 14 101,295 86,290 Other receivables 15 300,188 209,028 Advance tax 171,580 195,232 Cash and bank balances 16 122,821 20,621

Total current assets 4,248,211 2,924,247 Total assets 7,978,638 6,271,402

EQUITY AND LIABILITIESShareholders’ equity Authorized share capital 140,000,000 (June 2014: 70,000,000) ordinary shares of Rs. 10 each 1,400,000 700,000

Issued, subscribed and paid-up share capital 85,840,745 (June 2014: 61,314,818) ordinary shares of Rs. 10 each 17 858,407 613,148

Revenue reserve -General reserve 280,251 280,251 -Unappropriated profit 3,409,017 2,250,665

Total shareholders’ equity 4,547,675 3,144,064

Surplus on revaluation of fixed assets 18 296,961 168,163

Non-current liabilities Long term finances - secured 19 642,857 675,000 Deferred liabilities 20 69,985 75,882

Total non-current liabilities 712,842 750,882

Current liabilities Current portion of long term finances 19 107,143 150,000 Short-term finances 21 682,334 795,882 Trade and other payables 22 1,617,026 1,226,459 Accrued mark-up 23 14,657 35,952

Total current liabilities 2,421,160 2,208,293 Total liabilities 3,134,002 2,959,175

Contingencies and commitments 24Total equity and liabilities 7,978,638 6,271,402

The annexed notes 1 to 45 form an integral part of these unconsolidated financial statements.

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Unconsolidated Profit and Loss Account For the year ended June 30, 2015



Note 2015 2014 ------- Rupees in ‘000 -------

NET SALES 25 7,582,470 6,071,823

COST OF SALES 26 4,250,170 3,594,642

GROSS PROFIT 3,332,300 2,477,181

Selling and distribution expenses 27 1,829,885 1,577,011

Administrative expenses 28 202,323 202,754

2,032,208 1,779,765

OPERATING PROFIT 1,300,092 697,416

Other income 29 805,676 593,049

2,105,768 1,290,465

Other expenses 30 147,938 118,943

Finance cost 31 190,166 213,402

338,104 332,345

PROFIT BEFORE INCOME TAX 1,767,664 958,120

Income tax expense 32 362,251 204,895


(Re-stated) 2015 2014 ------- Rupees -------

EARNINGS PER SHARE - BASIC AND DILUTED 33 16.37 8.77


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Unconsolidated Statement of Comprehensive Income For the year ended June 30, 2015



Note 2015 2014 ------- Rupees in ‘000 -------


Other comprehensive income

Items that may be reclassified to profit and loss account subsequently

Items that will not be subsequently reclassified to profit and loss account

Remeasurement of defined benefit obligations 34.1.4 (1,802) (3,025)

Total of items that will not be reclassified to profit and loss account (1,802) (3,025)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,403,611 750,200


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Unconsolidated Statement of Cash Flows For the year ended June 30, 2015



Note 2015 2014 ------- Rupees in ‘000 -------

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations after working capital changes 35 1,375,669 1,011,393 Gratuity paid (1,293) (140,831)Taxes paid (350,804) (434,406)Recovery/(advance) of long-term loans - net 56 280 Payment of short-term loans and advances - net (207,494) (69,306)Receipts of long-term deposits - net - 4,647

Net cash from operating activities 816,134 371,777

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment 5.1 (61,595) (90,087)Additions to capital work in progress - net 5.7 (1,136) (1,642)Purchase of intangible assets 6 (2,820) - Expenditures incurred on investment property 7.2 (122,991) (203,879)Long-term investment in subsidiaries (159,191) (259,100)Proceeds from disposal of property, plant and equipment 5.5 25,044 94,366 Mark-up received/expenses claimed from associated company - net 1,650 52,531

Net cash used in investing activities (321,039) (407,811)

CASH FLOWS FROM FINANCING ACTIVITIES

Finance lease rentals paid - (2,388)Long-term finance (re-paid) (75,000) (141,667)Dividend paid (162) (94,330)Finance charges paid (204,185) (193,645)

Net cash used in financing activities (279,347) (432,030)

Net increase/(decrease) in cash and cash equivalents 215,748 (468,064)

Cash and cash equivalents at the beginning of the year (775,261) (307,197)

Cash and cash equivalents at the end of the year 36 (559,513) (775,261)


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Unconsolidated Statement of Changes in Equity For the year ended June 30, 2015



Capital Reserve

RevenueReserve

Share capital

Reserve for issue of

bonus shares

General reserve

Totalreserves


Total share holders’ equity

Note ----------------------------- Rupees in ‘000 -----------------------------

Balance as at July 01, 2013 471,652 - 280,251 280,251 1,719,434 2,471,337

Transferred from surplus on revaluation of fixed assets on account of incremental depreciation for the year (net of tax) 18.1 - - - - 16,857 16,857

Profit for the year - - - - 753,225 753,225 Other comprehensive income - - - - (3,025) (3,025)

- - - - 750,200 750,200 Transactions with owners

Transfer to reserve for issue of bonus shares - 141,496 - 141,496 (141,496) -

Bonus shares issued at the rate of 30% in the ratio of 30 shares for every 100 shares held 141,496 (141,496) - (141,496) - -

Cash dividend paid for the year ended June 30, 2013 at the rate of Re. 1 per share - - - - (94,330) (94,330)

141,496 - - - (235,826) (94,330)

Balance as at June 30, 2014 613,148 - 280,251 280,251 2,250,665 3,144,064

Balance as at July 1, 2014 613,148 - 280,251 280,251 2,250,665 3,144,064

Profit for the year - - - - 1,405,413 1,405,413 Other comprehensive loss - - - - (1,802) (1,802)

- - - - 1,403,611 1,403,611 Transactions with owners

Transfer to reserve for issue of bonus shares - 245,259 - 245,259 (245,259) -

Bonus shares issued at the rate of 40% in the ratio of 40 shares for every 100 shares held 245,259 (245,259) - (245,259) - -

245,259 - - - (245,259) -

Balance as at June 30, 2015 858,407 - 280,251 280,251 3,409,017 4,547,675


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Notes to the Unconsolidated Financial Statements For the year ended June 30, 2015

1 LEGAL STATUS AND OPERATIONS

The Searle Company Limited (the Company) was incorporated in Pakistan as a private limited company in October 1965. In November 1993, the Company was converted into a public limited company. Its shares are quoted on the Karachi and Islamabad stock exchanges. The Company is principally engaged in the manufacture of pharmaceutical products and other consumer products. In addition, the Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The registered office of the Company is situated at First Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi.

International Brands Limited is the holding company, which holds 55.31% shareholding in the Company.

The Company is the holding company of IBL HealthCare Limited due to significant representation in Board of directors of, and 51.97% shareholding in, IBL HealthCare Limited.

The Company owns three wholly owned subsidiaries namely Searle Pharmaceuticals (Private) Limited, Searle Laboratories (Private) Limited and Searle Biosciences (Private) Limited.

2 STATEMENT OF COMPLIANCE

2.1 These unconsolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

2.2 STANDARDS, INTERPRETATION AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS

2.2.1 Standards, amendments and interpretations to the published standards that are relevant to the Company and adopted in the current year

Introductory amendments and improvements of standards and interpretations

Effective date

IAS 19 - Employee Contributions (Amendments to IAS 19) July 1, 2014



IAS 36 - Recoverable amount Disclosures for non - financial assets(Amendments to IAS 36) July 1, 2014

IFRIC 21 - Levies January 1, 2014

IAS 32 - Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) January 1, 2014

Adoption of the above revisions, amendments and interpretations of the standards have no significant effect on the amounts for the year ended June 30, 2014 and 2015.

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2.2.2 Standards, amendments to published standards and interpretations that are effective but not relevant

The other new standards, amendments to published standards and interpretations that are mandatory for the financial year beginning on July 1, 2014 are considered not to be relevant or to have any significant effect on the Company’s financial reporting and operations and are therefore not presented here.

2.2.3 Standards, amendments and interpretations to the published standards that are relevant but not yet effective and not early adopted by the Company

The following new standards, amendments to published standards and interpretations would be effective from the dates mentioned below against the respective standard or interpretation.

Amendments and improvements of standards Effective date

IAS 1 - Disclosure Initiative (Amendments to IAS 1 Presentation of Financial Statements) January 1, 2016

Annual Improvements to IFRS 2012 - 2014 Cycle January 1, 2016

IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and IAS 38) January 1, 2016

IFRS 13 - Fair Value Measurement January 1, 2015

The Company is in the process of assessing the impact of these Standards, amendments and interpretations to the published standards on the financial statements of the Company.

2.2.4 Standards, amendments and interpretations to the published standards that are not yet notified by the Securities and Exchange Commission of Pakistan (SECP) for applicability in Pakistan

Following new standards have been issued by the International Accounting Standards Board (IASB) which are yet to be notified by the SECP for the purpose of applicability in Pakistan.

Standard IASB effective date(Annual periods

beginning on or after)IFRS 14 - Regulatory Deferral Accounts January 1, 2016IFRS 15 - Revenue from Contracts with Customers January 1, 2017IFRS 9 - Financial Instruments (2014) January 1, 2018

3 SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

These unconsolidated financial statements have been prepared under the ‘historical cost convention’ except the revaluation of certain assets at fair value and recognition of certain retirement benefits at present value.

These unconsolidated financial statements have been prepared following the accrual basis of accounting except for the cash flow information.

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3.2 Use of critical accounting estimates and judgments

The preparation of unconsolidated financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience, industry trends, legal and technical pronouncements and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant areas requiring the use of management estimates in these unconsolidated financial statements relate to the following:

Note

a) Staff retirement benefits 4.2.1b) Taxation 4.3c) Useful life of depreciable and amortizable assets 4.5d) Revaluation of assets 4.5.2e) Estimates of recoverable amounts of inventories 4.10f) Loans and receivables 4.11g) Provisions for doubtful debts 4.16

The determination of carrying amount of staff retirement benefits that are defined benefit plans requires actuarial assumptions and estimates about financial variables such as future salary increases, and demographic variables such as employee turnover, mortality rates, etc. The Company employs services of professional actuaries to make such estimates and assumptions using actuarial techniques.

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these unconsolidated financial statements are set out below. These policies have been consistently applied to all the years presented except for the change in accounting policy as disclosed in note 2.2.1 to the unconsolidated financial statements.

4.1 Loans and finances

These are initially recognized at cost being the fair value of the consideration received together with the associated transaction cost. Subsequently, these are recognized at amortized cost using the effective interest method.

4.2 Staff retirement benefits

4.2.1 Defined benefit plan

The Company operates an unfunded gratuity scheme covering all unionized employees with five or more years of service with the Company. The provision has been made in accordance with actuarial valuations carried out as of June 30, 2015 using the projected unit credit method based on the significant assumptions stated in note 35.

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4.2.2 Defined contribution plan

In addition, the Company operates a recognized provident fund scheme for its employees. Equal monthly contributions are made, both by the Company and employees, to the fund at the rate of 10% of basic salary.

4.3 Taxation

4.3.1 Current

The charge of current tax is based on taxable income at the applicable rate of taxation after taking into account available tax credits and rebates. Income for the purpose of computing current taxation is determined under the provisions of tax laws.

4.3.2 Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all taxable temporary differences arising from differences between the carrying amount of assets and liabilities in the unconsolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted. The Company takes into account the current income tax law and decisions taken by the taxation authorities.

Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity.

4.4 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which these are incurred.

4.5 Property, plant and equipment

4.5.1 Initial recognition

An item of property, plant and equipment is initially recognized at cost which is equal to the fair value of consideration paid at the time of acquisition or construction of the asset.

The Company accounts for property, plant and equipment acquired under finance lease by recording the assets and the related liability. These amounts are determined at the inception of lease, on the basis of the lower of the fair value and the present value of minimum lease payments. Financial charges are allocated to the accounting period in a manner so as to provide a constant rate of charge on the outstanding liability.

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4.5.2 Measurement subsequent to initial recognition

a) Carried using revaluation model

Building on leasehold land, plant and machinery, motor vehicles and air conditioning systems are stated at their revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Leasehold land is stated at its revalued amount. Fair value is determined by external professional valuers with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.

b) Carried using cost model

Property, plant and equipment other than those mentioned above are stated at cost less accumulated depreciation and accumulated impairment losses.

c) Depreciation

Depreciation on assets (other than leasehold land) is charged to unconsolidated profit and loss account applying the straight-line method whereby the cost of an asset is written off over its useful life. Same basis and estimates for depreciation are applied to owned assets and assets acquired under finance lease.

Depreciation on additions is charged from the month during which the asset is available for use. For disposals during the year, depreciation is charged up to the end of the month preceding the month of disposal. Depreciation is charged to unconsolidated profit and loss account or included in the cost of inventory by applying the rates mentioned in note 5.1.

Maintenance and normal repairs are charged to unconsolidated profit and loss account as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired.

Gains and losses on disposal of property, plant and equipment are included in unconsolidated profit and loss account.

d) Surplus on revaluation of fixed assets

The surplus arising on revaluation of fixed assets is credited to the “Surplus on Revaluation of Fixed Assets” shown below equity in the balance sheet in accordance with the requirements of section 235 of the Companies Ordinance, 1984. Accordingly the Company has adopted the following accounting treatment of depreciation on revalued assets, keeping in view the Securities and Exchange Commission of Pakistan’s (SECP) SRO 45(1)/2003 dated January 13, 2003:

- depreciation on assets which are revalued is determined with reference to the value assigned to such assets on revaluation and depreciation charge for the year is taken to the profit and loss account; and

- an amount equal to incremental depreciation for the year net of deferred taxation is transferred from “Surplus on Revaluation of Fixed Assets account” to accumulated profit through statement of changes in equity to record realization of surplus to the extent of the incremental depreciation charge for the year.

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4.5.3 Capital work in progress

Capital work in progress (CWIP) is stated at cost less any impairment losses. All expenditures in connection with specific assets incurred during installation and construction period are carried to CWIP. These expenditures are transferred to operating assets as and when these are available for intended use.

4.6 Intangible assets

- An intangible asset is initially recognized at cost which is equal to the fair value of consideration paid at the time of acquisition of the asset. Intangible assets are subsequently stated at cost less accumulated amortization and accumulated impairment losses. Gains and losses on disposal of intangible assets are included in unconsolidated profit and loss account.

- Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortization and accumulated impairment losses, if any.

- Intangibles having infinite life are carried at cost less impairment, if any.

- Amortization is calculated using the straight line method to allocate the cost of trademarks and licenses over the useful lives (3 - 15 years) by applying the rates mentioned in note 6 to the financial statements.

4.7 Investment property

The Company carries investment properties at their respective costs under the cost model in accordance with IAS 40 - ‘Investment Property’. The fair values are determined by the independent valuation experts and such valuations are carried out every year to determine the recoverable amount.

Building classified under investment property is carried at its respective cost less accumulated depreciation and accumulated impairment losses if any.

Leasehold land classified under investment property is carried at its respective cost less accumulated impairment losses if any.

The Company carries investment property under work in progress at their respective costs less accumulated impairment losses if any. Depreciation is charged on such property after it is completed as per IAS 40 - ‘Investment Property’.

4.8 Investments

4.8.1 Investment in subsidiary companies

Investment in subsidiary companies is initially recognized at cost. At subsequent reporting dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying amounts of investments are adjusted accordingly. Impairment losses are recognized as expense. Where impairment losses subsequently reverse, the carrying amounts of the investments are increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal of impairment loss is recognized in unconsolidated profit and loss account.

4.8.2 Investment in associated companies

Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights or common directorship. Investments in associates are initially recognized at cost. At subsequent reporting dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying amounts of

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investments are adjusted accordingly. Impairment losses are recognized as expense. Where impairment losses subsequently reverse, the carrying amounts of the investments are increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal of impairment loss is recognized in unconsolidated profit and loss account. Investment in associates are accounted for using the equity method of accounting in the consolidated financial statements.

4.9 Stores and spares

All stores, spares and loose tools either imported or purchased locally are charged to unconsolidated profit and loss account when consumed and are valued at cost, which is determined on a first-in-first-out basis. Spares-in-transit are valued at cost accumulated to the balance sheet date. A provision is made for any excess of book value over net realizable value.

The Company reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence, if there is any change in usage pattern and physical form of related stores, spares and loose tools.

4.10 Stocks-in-trade

These are valued at the lower of cost and net realizable value except goods-in-transit which are valued at invoice price and related expenses incurred up to the balance sheet date. Cost signifies standard cost adjusted by variances.

Cost of raw and packing material comprises purchase price including directly related expenses less trade discounts. Cost of work-in-process and finished goods includes cost of raw material, direct labour and related production overheads.

Net realizable value signifies the estimated selling price in the ordinary course of business less cost of completion and cost necessary to be incurred in order to make the sale.

4.11 Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than (a) those that the Company intends to sell immediately or in the near term, which shall be classified as held for trading, and those that the Company upon initial recognition designates as at fair value through profit or loss; (b) those that the Company upon initial recognition designates as available for sale; or (c) those for which the Company may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as available for sale.

Subsequent to initial measurement loans and receivables are measured at amortized cost using the effective interest method, less provision for impairment. Gains or losses arising on remeasurement of loans and receivables are taken to the profit and loss account.

Gains or losses are also recognized in profit and loss account when loans and receivables are derecognized or impaired, and through the amortization process.

Interest free loans to employees are stated at cost and recovered in equal monthly installments through salary of the employees.

4.12 Cash and cash equivalents

Cash and cash equivalents comprise cash balances, and current and deposit account balances with banks. Running finance facilities availed by the Company, which are payable on demand and form an integral part of Company’s cash management are included as part of cash and cash equivalents for the purpose of statement of cash flows.

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4.13 Foreign currencies

Transactions in foreign currencies are accounted for in rupees at the rate of exchange prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies as at the balance sheet date are expressed in rupees at rates of exchange prevailing on that date except where forward exchange cover has been obtained for payment of liabilities, in which case the contracted rates are applied. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transactions. Exchange gains and losses are included in unconsolidated profit and loss account.

4.14 Revenue recognition

Revenue is recognized when it is probable that economic benefits will flow to the Company and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable on the following basis:

- Sales are recorded on despatch of goods. Export sales are recorded when the goods are shipped.

- Toll manufacturing income is recognized when services are rendered.

- Dividend income, other than those from investments measured using equity method, is recognized when the Company’s right of receipt is established.

- Bank profit and commission income is recognized on accrual basis.

4.15 Research and development cost

- Research cost is charged to unconsolidated profit and loss account as and when incurred.

- Development cost is charged to unconsolidated profit and loss account when it does not meet the criteria of capitalization as specified in IAS 38 ‘Intangible Assets’.

4.16 Provisions

Provisions are recognized in the unconsolidated balance sheet when the Company has a legal or constructive obligation, as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of obligation.

4.17 Impairment

The carrying amounts of the Company’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists the assets’ recoverable amount is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in unconsolidated profit and loss account.

4.18 Financial instruments

4.18.1 Recognition

A financial instrument (financial asset or financial liability) is recognized in the unconsolidated balance sheet when the Company becomes a party to the contractual provisions of the instrument.

Financial assets carried on the unconsolidated balance sheet include cash and bank balances, long term investments, trade debts, other receivables, loans, advances and deposits.

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Financial liabilities carried on the unconsolidated balance sheet include long term finances, loans, advances and deposits, short term finances, trade and other payables and accrued mark-up.

At the time of initial recognition i.e. at the time when the Company becomes a party to the contractual provisions of the instrument, all financial assets and financial liabilities are measured at cost, which is the fair value of the consideration given or received for it following trade date accounting. Transaction costs are included in the initial measurement of all financial assets and liabilities except for transaction costs incurred on financial assets and liabilities classified as ‘at fair value through profit or loss’ and ‘held for trading’ and that may be incurred on disposal. The particular recognition methods adopted for the measurement of financial assets and liabilities subsequent to initial measurement are disclosed in the policy statements associated with each item.

Financial assets or a part thereof is derecognized when the Company looses control of the contractual rights that comprise the financial asset or part thereof. Financial liabilities or a part thereof is removed when it is extinguished, i.e. the obligation specified in contract is discharged, cancelled or expired.

4.18.2 Off-setting

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

4.18.3 Regular way purchase and sale transactions

All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention are recognized at the trade date. Trade date is the date on which the Company commits to purchase or sell the asset.

4.19 Related party transactions

All transactions involving related parties arising in the normal course of business are conducted at arm’s length at normal commercial rates on the same terms and conditions as third party transactions using valuation modes, as admissible, except in extremely rare circumstances where, subject to the approval of the Board of Directors, it is in the interest of the Company to do so.

4.20 Dividend

Dividend distribution to the Company’s shareholders is recognized as a liability in the Company’s unconsolidated financial statements in the period in which such dividends are approved.

4.21 Functional and presentation currency

Items included in the unconsolidated financial statements are measured using the currency of the primary economic environment in which the Company operates. The unconsolidated financial statements are presented in Pakistani Rupees, which is the Company’s functional and presentation currency.

4.22 General

- Figures have been rounded-off to nearest thousand rupee, unless stated otherwise.

- The comparative figures have been reclassified where considered necessary for the purpose of better presentation of the financial statements. However, no material reclassifications are made in these unconsolidated financial statements which have not been disclosed separately.

A n n u a l R e p o r t 2 0 1 5 119


Note 2015 20145 PROPERTY, PLANT AND EQUIPMENT ---Rupees in ‘000 ---

Operating assets 5.1 687,332 555,899

Capital work in progress - at cost 5.7 - 2,407 687,332 558,306

5.1 The following is a statement of operating assets: Owned assets Leased assets

Total Leasehold land*


land

Plant and machinery

Office equipment

Furniture and fixtures Vehicles Air -

conditioning Sub-total Plant and machinery Vehicles Sub-total

--------------------------------------------------------------------------- (Rupees in ‘000) --------------------------------------------------------------------------- As at June 30, 2014 Cost / revalued amount 273,976 181,768 702,958 42,377 23,573 39,375 56,470 1,320,497 - - - 1,320,497 Accumulated depreciation - (121,569) (508,493) (35,152) (18,333) (26,954) (54,097) (764,598) - - - (764,598)Net book amount 273,976 60,199 194,465 7,225 5,240 12,421 2,373 555,899 - - - 555,899

Year ended June 30, 2015

Opening net book amount 273,976 60,199 194,465 7,225 5,240 12,421 2,373 555,899 - - - 555,899 Transfer from capital work in

progress/Additions 18,073 - 12,883 19,148 290 13,679 1,065 65,138 - - - 65,138

Upward revaluation (refer note 18) 128,798 - - - - - - 128,798 - - - 128,798

Disposal (refer note 5.5) Cost / revalued amount - - - (293) - (23,811) (234) (24,338) - - - (24,338)Accumulated depreciation - - - 278 - 16,044 143 16,465 - - - 16,465

- - - (15) - (7,767) (91) (7,873) - - - (7,873)

Depreciation charge - (5,026) (37,465) (5,007) (1,442) (4,858) (832) (54,630) - - - (54,630)Closing net book amount 420,847 55,173 169,883 21,351 4,088 13,475 2,515 687,332 - - - 687,332

As at June 30, 2015Cost / revalued amount 420,847 181,768 715,841 61,232 23,863 29,243 57,301 1,490,095 - - - 1,490,095 Accumulated depreciation - (126,595) (545,958) (39,881) (19,775) (15,768) (54,786) (802,763) - - - (802,763)Net book amount 420,847 55,173 169,883 21,351 4,088 13,475 2,515 687,332 - - - 687,332

As at June 30, 2013 Cost / revalued amount 273,976 177,214 647,115 38,155 22,720 103,697 55,617 1,318,494 - 5,460 5,460 1,323,954 Accumulated depreciation - (112,853) (455,452) (32,181) (16,905) (77,303) (49,608) (744,302) - (3,778) (3,778) (748,080)Net book amount 273,976 64,361 191,663 5,974 5,815 26,394 6,009 574,192 - 1,682 1,682 575,874

Year ended June 30, 2014 Opening net book amount 273,976 64,361 191,663 5,974 5,815 26,394 6,009 574,192 - 1,682 1,682 575,874 Additions - 4,554 55,843 4,630 853 23,354 853 90,087 - - - 90,087 Transfers Cost / revalued amount - - - - - 5,460 - 5,460 - (5,460) (5,460) - Accumulated depreciation - - - - - (4,141) - (4,141) - 4,141 4,141 -

- - - - - 1,319 - 1,319 - (1,319) (1,319) - Disposal Cost / revalued amount - - - (408) - (93,136) - (93,544) - - - (93,544)Accumulated depreciation - - - 290 - 63,494 - 63,784 - - - 63,784

- - - (118) - (29,642) - (29,760) - - - (29,760)

Depreciation charge - (8,716) (53,041) (3,261) (1,428) (9,004) (4,489) (79,939) - (363) (363) (80,302)Closing net book amount 273,976 60,199 194,465 7,225 5,240 12,421 2,373 555,899 - - - 555,899

As at June 30, 2014 Cost / revalued amount 273,976 181,768 702,958 42,377 23,573 39,375 56,470 1,320,497 - - - 1,320,497 Accumulated depreciation - (121,569) (508,493) (35,152) (18,333) (26,954) (54,097) (764,598) - - - (764,598)Net book amount 273,976 60,199 194,465 7,225 5,240 12,421 2,373 555,899 - - - 555,899

- 5% and 20%

10%, 20% and 33%

10%, 20% and 33%

10%, 20% and 33% 20% 10% and

20% 10% 20% Depreciation rate

* Includes land having market value / fair value of Rs. 88.375 million (2014: Rs. 88.375 million) for which lease in the name of the Company has not been finalized.

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5.2 The Company had revalued its operating assets classified under leasehold land, building on leasehold land, plant and machinery and air-conditioning as at April 26, 2015. The valuation was performed by an independent valuer, M/s. Anderson Consulting (Private) Limited. The surplus arising on assets other than land as a result of accounting under revaluation model based on that valuation was not material, therefore, no effect of revaluation had been taken in the financial statements for the year ended June 30, 2015. These assets were earlier carried at such revalued amounts as determined by an independent valuer, M/s. Iqbal A. Nanjee as at June 30, 2004.

5.3 Had there been no revaluation of leasehold land, building on leasehold land, plant and machinery, vehicles and air-conditioning system, cost and written down value of revalued assets would have been as follows:

Note 2015 2014 ------- Rupees in ‘000 -------

5.3.1 Cost of assets held under revaluation model

Owned assetsLeasehold land 123,886 105,813 Building on leasehold land 144,134 144,134 Plant and machinery 521,584 508,702 Vehicles 29,243 39,375 Air conditioning system 20,837 20,006

839,684 818,030

5.3.2 Net book amount under cost model of assets held under revaluation model

Owned assetsLeasehold land 123,886 105,813 Building on leasehold land 55,173 60,199 Plant and machinery 169,882 194,465 Vehicles 13,476 12,421 Air conditioning system 2,515 2,373

364,932 375,271

5.4 The depreciation expense has been allocated as follows:

Cost of sales 26 45,387 68,572 Selling and distribution expenses 27 29,377 7,105 Administrative expenses 28 4,816 4,625

79,580 80,302

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5.5 Following items of property, plant and equipment were disposed off during the year:


revalued amount


Net book value

Sale proceeds


--------------------------- (Rupees in ‘000) ---------------------------Vehicles


Mr. Munawwar Mirza, House No. N-760, Surjani Town, Sector 7-D, Karachi




Mr. Saeed Ur Rehman, R-54,Block E, North Nazimabad, Karachi


Mr. Sohail Malik - House No. B-110, Sector 9, North Karachi, Karachi


Mr. Yaseen Hanif, H.No Fl-1, 4/19, Block 5, North Nazimabad, Karachi




Mr. Sohail Malik - House No. B-110, Sector 9, North Karachi, Karachi

1,289 1,096 193 1,000 807 Advertisement / bid

Mr. Taj Muhammad (Employee), H.No 29, Hasan House, Momin Town, Peshawar




122



revalued amount


Net book value

Sale proceeds


--------------------------- (Rupees in ‘000) ---------------------------



Mr. Anas Peeran, D-35, Street 1, Block H, North Nazimabad, Karachi


Mr. Jawwad Ahmad, House No. R-421, Buffer Zone, Sector 15-A-3, Karachi


Mrs. Shagufta Sohail Malik - House No. B-110, Sector 9, North Karachi, Karachi


Mr. Mansoor Majid (Employee), House No. C-20/9, Malir Colony, Karachi


Mr. M. Saleem - Block # 408, Bantwa Nagar, Liaquatabad Karachi.



4,900 4,655 245 3,325 3,080 Advertisement / bid

Myplan Pharmaceuticals (Private) Limited, 32 Km, Multan Road, Lahore.


Mr. M.Ashfaq (Employee), Flat No. 207, Eden Willa, Karachi East.


Mr. Ghulam Mahmood (Employee), B-1, Jan Plaza, North Nazimabad, Near Sakhi Hassan, Block K, Karachi


Mr. Jawwad Ahmad, House No. R-421, Buffer Zone, Sector 15-A-3, Karachi


A n n u a l R e p o r t 2 0 1 5 123



revalued amount


Net book value

Sale proceeds


--------------------------- (Rupees in ‘000) ---------------------------



Mr. M.Faheem Modi, Beverley Homes, House No. D-89/B, Clifton Block 7, Karachi


Mr. M.Faheem Modi, Beverley Homes, House No. D-89/B, Clifton Block 7, Karachi


Mr. M.Javed Akhtar (Employee), H.No 438, Sector 14, Block D, Karachi


Mr. Shehzad Aziz (Employee), Street No 4, Dilzaak Road, Faisal Colony, Peshawar

977 163 814 1,360 546 Advertisement / bid

Mr. S.Masroor Hussain (Employee), H.No B-17, Maisam Plaza, Block 3, Gulshan-E-Iqbal, Karachi

2,479 702 1,777 2,150 373 Advertisement / bid

Ms. Muneeza Imran, Flat No. D/8, Dolmen Heights, Shaheed-e-Millat Road, Karachi.

Sub-total 16,596 9,036 7,560 18,859 11,299

Aggregate of assets disposed off having written down value below Rs. 50,000 each

Office equipment 293 278 15 - (15)

Air Conditioners 234 143 91 47 (44)

Vehicles 7,215 7,008 207 6,138 5,931

Sub-total 7,742 7,429 313 6,185 5,872

Total - 2015 24,338 16,465 7,873 25,044 17,171

Total - 2014 93,544 63,784 29,760 94,366 64,606

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Note 2015 2014 ------(Rupees in ‘000)------

5.6 Net gain on disposal of property, plant and equipment has been presented as follows:

Other operating income - gain on disposal of property, plant and equipment 29 17,262 65,330 Other operating expenses - loss on disposal of property, plant and equipment 30 (91) (724)

17,171 64,606

5.7 Movement in capital work in progress

Balance at the beginning of the year 2,407 765 add: Additions during the year 1,136 4,915 less: Transfer to operating assets (3,543) (3,273)Balance at the end of the year - 2,407

6 INTANGIBLE ASSETSDistribution

rights Brand name

& logo Software licenses Total

------------------(Rupees in ‘000)------------------

Year ended June 30, 2015 Opening net book amount - 32,916 656 33,572 Additions - - 2,820 2,820 Amortization charge - (5,000) (750) (5,750)Closing net book amount - 27,916 2,726 30,642

As at June 30, 2015 Cost 76,275 74,703 14,841 165,819 Accumulated amortization (76,275) (46,787) (12,115) (135,177)Net book amount - 27,916 2,726 30,642

Year ended June 30, 2014 Opening net book amount - 37,916 1,092 39,008 Additions - - - - Amortization charge - (5,000) (436) (5,436)Closing net book amount - 32,916 656 33,572

As at June 30, 2014 Cost 76,275 74,703 12,021 162,999 Accumulated amortization (76,275) (41,787) (11,365) (129,427)Net book value - 32,916 656 33,572

Amortization rate 10% 10% 33.33% and 20%

6.1 Software licenses include various licenses and enterprise resources planning software.

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Note 2015 20147 INVESTMENT PROPERTY ---- Rupees in ‘000 ----

Operating assets 7.1 2,491,318 1,915,871 Investment property under work in progress - at cost 7.2 - 477,406

2,491,318 2,393,277

7.1 The following is a statement of operating assets:

Owned assets

Total Leasehold land


land

Office Equipment

Electrical Equipment

Lifts & Elevators Generators Furniture &

FixturesAir -

conditioning

----------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------- As at June 30, 2014 Cost / revalued amount 1,915,871 - - - - - - - 1,915,871 Accumulated depreciation - - - - - - - - -

Net book amount 1,915,871 - - - - - - - 1,915,871

Year ended June 30, 2015 Opening net book amount 1,915,871 - - - - - - - 1,915,871 Additions - 353,254 7,597 52,402 41,200 22,136 38,168 85,640 600,397 Depreciation charge - (10,137) (886) (3,057) (2,403) (1,291) (2,180) (4,996) (24,950)

Closing net book amount 1,915,871 343,117 6,711 49,345 38,797 20,845 35,988 80,644 2,491,318

As at June 30, 2015 Cost / revalued amount 1,915,871 353,254 7,597 52,402 41,200 22,136 38,168 85,640 2,516,268 Accumulated depreciation - (10,137) (886) (3,057) (2,403) (1,291) (2,180) (4,996) (24,950)

Net book amount 1,915,871 343,117 6,711 49,345 38,797 20,845 35,988 80,644 2,491,318

7.2 Movement in investment property under work in progress - at cost

Balance at the beginning of the year 477,406 273,527 Add: Addition under work in progress 122,991 203,879 Less: Transfer to operating assets - investment property (600,397) - Balance at the end of the year - 477,406

7.3 Leasehold land classified under investment property had been valued under the market value basis by an independent valuer, M/s. Iqbal A. Nanjee & Co. (Private) Limited. Market value of the property based on the valuation as of September 30, 2014 was Rs. 1.851 billion. Further, all other assets classified under investment property have been valued under the market value basis by the same valuer. Market value of these assets based on the valuation as of September 29, 2015 was Rs. 693.047 million.

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Note 2015 2014 ----- (Rupees in ‘000) -----

8 LONG-TERM INVESTMENTS - in related parties

Quoted subsidiary - at cost 8.1 194,716 100,000 Unquoted subsidiaries - at cost 8.2 135,400 135,400 Other investment - at cost 8.3 188,975 124,500

519,091 359,900

8.1 This represents 10,591,500 (2014: 10,000,000) fully paid ordinary shares of Rs. 10 each in IBL HealthCare Limited (IBLHC).

The Company has received 3,449,997 shares against 30% stock dividend distributed by IBLHC during the year (2014: 1,499,991 shares). The Company holds 15,541,488 shares (2014: 11,499,991 shares) of IBLHC and the proportion of ownership interest of the Company is 51.97% (2014: 50%).

The bonus shares received by the Company also include 174,999 shares which are freezed in the Central Depository Company (CDC) account in lieu of 5% withholding tax under sections 236M of the Income Tax Ordinance, 2001. The Company has filed a petition against such provision and the case is pending before the High Court.

8.2 This represents:

- 40,000 (2014: 40,000) fully paid ordinary shares of Rs. 10 each in wholly owned subsidiary named Searle Pharmaceuticals (Private) Limited, amounting to Rs. 0.4 million (2014: Rs. 0.4 million).

- 12,500,000 (2014: 12,500,000) fully paid ordinary shares of Rs. 10 each in wholly owned subsidiary named Searle Laboratories (Private) Limited, amounting to Rs. 125 million (2014: Rs. 125 million).

- 1,000,000 (2014: 1,000,000) fully paid ordinary shares of Rs. 10 each in wholly owned subsidiary named Searle Biosciences (Private) Limited, amounting to Rs. 10 million (2014: 10 million).

8.3 This represents 1,360,000 (2014: 830,000) fully paid ordinary shares of Rs. 100 each in Nextar Pharma (Private) Limited (NPL), which represents 27.20% (2014: 21.78%) of the total share capital of NPL.

The shares of NPL are not listed on any stock exchange and hence published price quotes are not available. NPL has not commenced operations as of the reporting date. The financial reporting date of NPL is June 30. Total equity/net assets of NPL amounted to Rs. 587.437 million based on un-audited financial statements for the year ended June 30, 2015.

All transfers of funds to the Company, i.e. distribution of cash dividends, are subject to approval by means of a resolution passed by the shareholders of NPL. The Company has not received any cash dividend during the year (2014: Nil). Moreover, the Company has not incurred any contingent liability or other commitments relating to its investments in associates.

A n n u a l R e p o r t 2 0 1 5 127


Note 2015 2014 ----- (Rupees in ‘000) -----

9 LONG-TERM LOANS

Secured - considered good 9.1 1,405 3,028 Less: Current portion - shown under loans and advances 13 (959) (2,526)

446 502 Considered doubtful - - Less: Accumulated impairment loss - -

- - 446 502

9.1 This represents interest-free loans for automobiles to employees other than executives, as defined in note 38. These are secured against provident fund balances of respective employees.


2015 2014 Note ----- (Rupees in ‘000) -----

10 LONG-TERM DEPOSITS

Deposit against rent 1,598 1,598

11 STOCK-IN-TRADE

Raw materials 441,818 292,963 Packing materials 144,532 160,079 Work in process 26 100,148 58,886 Finished goods 26 237,124 203,089 Materials in transit 92,532 89,562

1,016,154 804,579

12 TRADE DEBTS

Considered good Export debtors, secured 60,467 37,925 Due from:

- associated companies - unsecured 12.1, 12.2 & 39.2 1,855,372 1,252,643

- others - unsecured 266,999 172,088 2,122,371 1,424,731 2,182,838 1,462,656

Considered doubtful - others 622 976 Less: Provision for doubtful debts 12.3 (622) (976)

- - 2,182,838 1,462,656

128


12.1 The receivable is stated net of amounts payable aggregating Rs. 58.49 million (2014: Rs. 100.87 million) on account of expenses claimed by the associated company.

12.2 At year-end, no amount was due from directors, chief executive officer and executives of the Company in respect of trade debts. Moreover, trade debts from related parties other than directors, chief executive officer and executives of the Company are as follows:

2015 2014 ----- (Rupees in ‘000) -----

- IBL Operations (Private) Limited 1,838,039 1,236,272 - United Brands Limited 16,840 15,965 - Dunkin Donuts/International Franchises (Private) Limited 10 284 - Habitt 483 122

1,855,372 1,252,643

12.3 At year-end, trade debts aggregating Rs. 0.622 million (2014: Rs. 0.976 million) were deemed to have been impaired. These balances are outstanding for more than 4 years.

12.4 In addition, some of the unimpaired trade debts are past due as at the reporting date, no provision has been made in respect of such trade debts. The aging of trade debts ‘past due’ but not impaired of related parties is as follows:

2015 2014 ----- (Rupees in ‘000) -----

Age analysis of ‘past due’ but not impaired trade debts due from related parties

- More than two months but less than four months 842,879 285,973 - More than four months but less than one year 17,471 52 - One year or more but less than two years - 673 - Two years and more 706 26

861,056 286,724

12.5 Competition Commission of Pakistan (CCP) through its order dated September 13, 2007 instructed the Company to reduce terms of trade credit with IBL Operations (Private) Limited, an associated concern, re-negotiate the offered rate of commission and conduct audit of the transactions. The Company filed a counter case in Honourable High Court of Sindh to revert the order. The Company, based on the opinion of its legal advisor, believes that it has a strong case and the matter would be decided in the favour of the Company.

Note 2015 2014 ----- (Rupees in ‘000) -----

13 LOANS AND ADVANCES

Considered good: Advances to:- employees 13.1 49,074 41,692 - suppliers 302,298 100,619

351,372 142,311 Current portion of long-term loans 9 959 2,526

Considered doubtful: 13.2 - 51 Less: Provision for doubtful advances - (51)

- - 352,331 144,837

A n n u a l R e p o r t 2 0 1 5 129


13.1 These mainly include advances for business purpose. Moreover, this also includes advances against salary for personal purposes. These are interest free and repayable on monthly basis. The reconciliation of amounts due from executives and non-executives of the Company is given as follows:

2015 2014 Executives Non-

executives Total Executives Non-executives Total

----------------------------------- (Rupees in ‘000) -----------------------------------

Opening balance 18,083 23,609 41,692 6,808 16,154 22,962

Add: Disbursements 59,400 112,352 171,752 47,284 89,525 136,809

Less: Repayments (57,258) (107,112) (164,370) (36,009) (82,070) (118,079)

Closing balance 20,225 28,849 49,074 18,083 23,609 41,692

13.2 During the year the Company recovered loans and advances aggregating Rs. 0.051 million which were deemed to have been impaired for the past three years.


Note 2015 2014 ---- (Rupees in ‘000) ----

14 TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS

Deposits- Trade deposits 14.1 43,000 40,564 Less: Provision for doubtful deposits (2,640) (2,640)

40,360 37,924 Prepayments 60,935 48,366

101,295 86,290

14.1 At year-end, trade deposits amounting to Rs. 14.15 million (2014: Rs. 13.37 million) were past due but not impaired. These balances are outstanding for more than two years. There has been no movement in provision for doubtful deposits during the year (2014: nil).

130


2015 2014 Note ---- (Rupees in ‘000) ----

15 OTHER RECEIVABLES

Receivables from related parties

Due from subsidiary companies:- Searle Laboratories (Private) Limited against expenses - 66 - Searle Biosciences (Private) Limited against expenses 150 - - Searle Pharmaceuticals (Private) Limited:

- against staff salaries and benefits - 77 - rental income against use of operating assets 2,000 3,000 - against dividend income 230,000 150,000

232,150 153,143

Due from associated companies:

- IBL Operations (Private) Limited against: - mark-up on over due balance 15.1 39,642 41,292 - staff salaries and benefits 1,278 -

- International Franchises Limited against rental income, staff salaries and other benefits 2,154 681

- Habitt against rental income 5,174 - 15.2 & 39.2 48,248 41,973

Surplus arising under retirement benefit fund 15.3 5,250 7,500

Advance against issue of shares 15.4 - 500

Receivables from other than related parties

Others, considered good 14,540 5,912 300,188 209,028

15.1 The receivable represents mark-up charged on cash collected at the rate of 6-months KIBOR plus 3% per annum as late payment liquidated damages with an exception of transaction delay. On January 15, 2011 the Company has amended the distribution agreement, accordingly no mark-up has been charged since then.

15.2 At year-end, an amount of Rs. 39.64 million (2014: 41.29 million) is due from associated company which is past due but not impaired. These balances are outstanding for more than two years.

15.3 This represents surplus on funded gratuity scheme discontinued by the Company with effect from December 31, 2012.

15.4 This represents advance amounting to Rs. Nil (2014: 0.5 million) paid to Nextar Pharma (Private) Limited for issue of shares.

A n n u a l R e p o r t 2 0 1 5 131


Note 2015 2014 ---- (Rupees in ‘000) ----

16 CASH AND BANK BALANCES

Cash in hand 1,429 1,342 Cheque in hand 100,000 -

Balance with banks in:- savings accounts 16.1 9 9 - current accounts 21,383 19,270

16.2 122,821 20,621

16.1 These balances carry mark-up at a rate of 3.5 % (2014: 6.5%).

16.2 This include Rs. 8.02 million (2014: Rs. 8.19 million) placed in special bank accounts for dividend purposes.

17 ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL

2015 2014 2015 2014 (Number of shares) ---- (Rupees in ‘000) ----

Ordinary shares of Rs. 10 each:

- fully paid in cash 3,969,000 3,969,000 39,690 39,690 - issued for consideration other than cash 24,000 24,000 240 240 - issued as fully paid bonus shares 81,847,745 57,321,818 818,477 573,218

85,840,745 61,314,818 858,407 613,148

2015 2014 (Number of shares)

17.1 Movement in number of shares

Number of shares at beginning of the year 61,314,818 47,165,245 Bonus shares issued during the year 24,525,927 14,149,573 Number of shares at end of the year 85,840,745 61,314,818

17.2 Capital management policies and procedures

The Company’s objective when managing above capital are:

- to safeguard its ability to continue as a going concern so that it can continue to provide returns to shareholders and benefit other stakeholders; and

- to maintain a strong capital base to support the sustained development of its business.

The Company manages its capital structure by monitoring return on net assets and maintaining optional capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares and other means commensurate to the circumstances.

132


18 SURPLUS ON REVALUATION OF FIXED ASSETS - net of deferred tax

The Company had revalued its operating assets classified under leasehold land, building on leasehold land, plant and machinery, vehicles and air-conditioning as at April 26, 2015. The valuation was performed by an independent valuer, M/s. Anderson Consulting (Private) Limited. The surplus arising on assets other than land as a result of accounting under revaluation model based on that valuation was not material, therefore, no effect of revaluation adjustment has been taken in the financial statements for the year ended June 30, 2015. These assets were earlier carried at such revalued amounts as determined by an independent valuer, M/s. Iqbal A. Nanjee as at June 30, 2004.

The surplus would be realized on disposal of revalued assets and on charging of incremental depreciation.

Note 2015 2014 ---- (Rupees in ‘000) ----

Surplus on revaluation of property, plant and equipment (the surplus) 18.1 296,961 168,163

Less: Impact of deferred tax liability on the surplus 18.2 - - Surplus on revaluation of fixed assets - net of deferred tax 296,961 168,163

18.1 Surplus on revaluation of property, plant and equipment (the surplus)

Surplus on revaluation of property, plant and equipment at the beginning of the year 168,163 193,705

Increase in surplus on revaluation during the year 128,798 - Transferred / realization of the surplus to accumulated

profit - net of deferred tax: - relating to incremental depreciation - (16,857)

296,961 176,848 Adjustment for deferred tax liability in respect of

transfers / realizations made - (8,685)Surplus on revaluation of property, plant and equipment

at the end of the year 296,961 168,163

18.2 Impact of deferred tax liability on the surplus

Deferred tax liability at 33% (2014: 34%) on the surplus at the beginning of the year - (8,685)

Adjustment for deferred tax liability in respect of transfers/realizations made during the year - 8,685

- - 19 LONG TERM FINANCES - secured

Long term loan utilized under mark-up arrangement 19.1 750,000 825,000 Less: Current portion of long term finances shown under

current liabilities (107,143) (150,000) 642,857 675,000

A n n u a l R e p o r t 2 0 1 5 133


19.1 The Company had obtained syndicate term finance facilities of Rs. 900 million (2014: Rs. 900 million) for a tenure of five years from Standard Chartered Bank (Pakistan) Limited (lead bank), Habib Bank Limited and The Bank of Punjab. During the current year, the Company has swapped the aforesaid syndicate finance facility with Dubai Islamic Bank Limited as against the aforementioned banks to the extent of balance amount payable i.e. Rs 750 million. This facility is repayable by May 2019.

19.2 The mark-up on above facilities is 6-months KIBOR plus 0.9% (2014: 6 months KIBOR plus 2.5%) per annum, payable semi-annually in arrears. The facility is secured by:

- 1st pari passu mortgage over all present and future immovable assets of the Company with a 25% security margin.

- 1st pari passu charge with 25% security margin over land (and other immovable assets) located at Plot No. 24/A1 & 2A, Delhi Mercantile Muslim Co-operative Housing Society, Block 7 & 8, Main Shahrah-e-Faisal, Karachi.

Note 2015 2014 ---- (Rupees in ‘000) ----

20 DEFERRED LIABILITIES

Deferred taxation 20.1 30,174 42,379 Staff retirement gratuity - unfunded 34.1 39,811 33,503

69,985 75,882

20.1 The net balance of deferred taxation is in respect of following temporary differences:

Credit balance arising on account of:Property, plant and equipment 32,155 44,773 Surplus on revaluation of property, plant and equipment 18.2 - -

32,155 44,773 Debit balance arising on account of:

Intangible assets (1,037) (1,264)Provisions for staff retirement gratuity, doubtful debts and

doubtful refunds (944) (1,130) (1,981) (2,394)

20.2 30,174 42,379

Provision for deferred taxation has been calculated only to the extent of those temporary differences except for those pertaining to surplus on revaluation of property, plant and equipment, that do not relate to the income falling under Final Tax Regime of the Income Tax Ordinance, 2001.

Note 2015 2014 ---- (Rupees in ‘000) ----

20.2 Balance at beginning of the year 42,379 40,982 Adjusted against deferred tax liability on the surplus 18.2 - - (Reversed)/raised during the year - through profit

and loss account 32 (12,205) 1,397 Balance at end of the year 20.1 30,174 42,379

21 SHORT-TERM FINANCES - secured

Running finances under mark-up arrangements 21.1 682,334 795,882

134


21.1 The Company has obtained syndicated running finances under mark-up arrangements of Rs. 1,033 million (2014: Rs. 1,095 million). The mark-up on running finances ranges between 9.5% to 12.42% (2014: 10.53% to 12.39%) per annum.

The running finances under mark-up arrangements are secured jointly by registered mortgage of Rs. 210.5 million (2014: Rs. 172.5 million) of immovable property together with joint pari passu charge on all current assets of the Company to the extent of Rs. 1,859 million (2014: Rs. 1,389 million). These short term facilities are arranged through Standard Chartered Bank (Pakistan) Limited from various banks. The securities are held jointly against the short term and long term finances (refer note 19).

Note 2015 2014 ---- (Rupees in ‘000) ----

22 TRADE AND OTHER PAYABLES

Creditors 593,730 521,551 Bills payable in foreign currency 264,170 102,009 Accrued liabilities 568,748 432,511 Advance from customers 41,369 72,361 Unclaimed dividend 10,740 10,902 Workers’ Profit Participation Fund 22.1 95,736 52,908 Workers’ Welfare Fund 24,553 21,892 Sales tax and excise duty payable - 3,284 Other liabilities 17,980 9,041

1,617,026 1,226,459

22.1 Workers’ Profit Participation Fund

Balance at beginning of the year 52,908 41,707 Contribution for the year 30 94,805 51,976

147,713 93,683 Interest on funds utilized in the Company’s business at 10.44% (2014: 12.65%) 31 3,999 3,816

151,712 97,499 Less: Payments made during the year (55,976) (44,591)Balance at end of the year 95,736 52,908

23 ACCRUED MARK-UP

Accrued mark-up on:- long term finances - secured 5,283 9,019 - short-term finances - secured 9,374 26,933

14,657 35,952

24 CONTINGENCIES AND COMMITMENTS

Contingencies

24.1 The facility for opening letters of credit (LCs) acceptances and guarantees as at June 30, 2015 amounted to Rs. 1,010 million (2014: Rs. 715 million) of which the amount remaining unutilized as at year end amounted to Rs. 547 million (2014: Rs. 329 million).

A n n u a l R e p o r t 2 0 1 5 135


24.2 During the year ended June 30, 2014, Sindh Revenue Board (SRB) has imposed sales tax on toll manufacturing at the rate of 16% of sales value. The Company has contested the imposition, and the Management and the tax advisor are confident that good grounds exist to contest the case. They believe that eventual outcome will come in favour of the Company. Hence no provision has been made in these financial statements. The case is pending for hearing before the Honourable High Court of Sindh.

Commitments

24.3 Future rentals payable against operating lease arrangements

The Company obtained factory building at Karachi on rent for a period of 5 years with effect from July 01, 2012. The rent agreement was renewed in December 2014. The details of future rentals over the lease period are as follows:

2015 2014 ---- (Rupees in ‘000) ----

Not later than one year 5,580 1,386 Later than one year but not later than five years 5,883 -

11,463 1,386

25 NET SALES

SalesLocal 7,216,899 5,838,713 Export 524,027 366,200

7,740,926 6,204,913

Sales returns & discounts (342,523) (324,469)Sales tax & excise duty (86,892) (118,320)

(429,415) (442,789) 7,311,511 5,762,124

Add: Toll manufacturing 270,959 311,322 Less : Sales tax - (1,623)

270,959 309,699 7,582,470 6,071,823

136


2015 2014 Note ---- (Rupees in ‘000) ----

26 COST OF SALES

Material consumed Raw and packing material consumed 2,492,808 2,096,991 Processing charges paid to third parties 1,008,919 669,654

3,501,727 2,766,645 Factory expensesSalaries, wages and benefits 26.1 288,695 278,913 Provision for staff gratuity (unfunded) 34.1.5 3,339 2,572 Provident fund contribution 6,302 6,152 Carriage and duties 13,565 9,912 Fuel, water and power 88,384 74,897 Rent and taxes 9,949 5,115 Communication 1,073 1,005 Stationery and supplies 7,638 2,712 Traveling 13,604 8,858 Advertisement 9,670 787 Entertainment 80 129 Repairs and maintenance 63,617 82,864 Medical expenses 4,060 3,298 Personal training and selection 1,396 238 Vehicle expenses 5,852 6,766 Subscription 162 55 Legal and professional charges 11,663 9,006 Depreciation 5.4 45,387 68,572 Insurance 3,151 2,551 Corporate services charged by associated company 39.2 7,920 1,440 Sundries 17,694 17,852

603,201 583,694 4,104,928 3,350,339

Work in process as at beginning of the year 11 58,886 74,309 4,163,814 3,424,648

Work in process as at end of the year 11 (100,148) (58,886)Cost of goods manufactured 4,063,666 3,365,762

Finished goods as at the beginning of the year 11 203,089 108,384 Finished goods purchased 276,018 408,352

479,107 516,736

Cost of samples (55,479) (84,767)Finished goods as at the end of the year 11 (237,124) (203,089)

Cost of sales 4,250,170 3,594,642

26.1 Salaries, wages and benefits include Rs. 84.57 million (2014: Rs. 70.02 million) in respect of contractual labour provided by Paksons (Private) Limited.

A n n u a l R e p o r t 2 0 1 5 137


2015 2014 Note ---- (Rupees in ‘000) ----

27 SELLING AND DISTRIBUTION EXPENSES

Salaries, wages and benefits 500,464 473,938 Provision for staff gratuity (unfunded) 34.1.5 1,904 1,465 Provident fund contribution 15,387 13,755 Services charges 31,201 32,104 Carriage and duties 109,903 95,372 Water and power 25,953 3,061 Rent and taxes 22,361 14,073 Communication 16,593 17,988 Stationery and supplies 7,633 7,715 Traveling 241,311 211,169 Advertising and promotion 357,583 326,154 Samples 76,149 82,616 Bonus to salesmen 133,154 78,531 Entertainment 818 1,266 Repairs and maintenance 12,941 2,451 Medical expenses 5,034 6,766 Personal training and selection 22,240 6,124 Vehicle expenses 49,007 85,811 Insurance 10,455 5,367 Depreciation 5.4 29,377 7,105 Subscription 20,681 14,226 Donation 27.1 5,991 4,666 Replacement products 55,446 53,495 Royalty 5,528 3,919 Corporate services charged by associated company 39.2 19,800 3,600 Legal and professional charges 52,366 23,788 Sundries 605 486

1,829,885 1,577,011

27.1 Directors of the Company have no interest in the donee institution except as stated in note 39.

138


2015 2014 Note ---- (Rupees in ‘000) ----

28 ADMINISTRATIVE EXPENSES

Salaries, wages and benefits 78,423 78,813

Provision for staff gratuity (unfunded) 34.1.5 556 429

Provident fund contribution 2,356 2,634

Carriage and duties 22 369

Water and power 1,048 1,125

Rent and taxes 7,979 5,004

Communication 6,078 4,343

Stationery and supplies 5,122 4,213

Traveling 6,031 1,947

Advertisement 82 84

Entertainment 209 85

Repairs and maintenance 19,393 16,010

Medical expenses 5,695 5,842

Personal training and selection 2,204 1,121

Vehicle expenses 4,518 4,177

Insurance 3,340 2,588

Depreciation 5.4 4,816 4,625

Amortization 6 5,750 5,436

Subscription 34 2

Donation 28.1 6,108 29,321

Corporate services charged by associated company 39.2 11,880 2,160

Legal and professional charges 29,421 31,269

Sundries 1,258 1,157 202,323 202,754

28.1 Directors of the Company have no interest in the donee institution except as stated in note 39.

A n n u a l R e p o r t 2 0 1 5 139


2015 2014 Note ---- (Rupees in ‘000) ----

29 OTHER INCOME

Income from financial assets

Exchange gain 13,446 26,281

Income from financial assets - related parties

Dividend income from IBL HealthCare Limited (subsidiary company) 11,500 15,000 Dividend income from Searle Pharmaceuticals (Private)

Limited (subsidiary company) 705,000 475,000 716,500 490,000

Income from non-financial assets

Gain on disposal of property, plant and equipment 5.6 17,262 65,330 Reversal of provision of doubtful supplier advances

and trade debts 13.2 405 - Others 18,020 5,689

35,687 71,019

Income from non-financial assets - related parties

Rental income against use of operating assets by related parties: - Searle Pharmaceuticals (Private) Limited (subsidiary company) 6,000 3,000 - International Franchises (Private) Limited (associated company) 2,930 2,749

8,930 5,749 Income from investment property 31,113 -

805,676 593,049

30 OTHER EXPENSES

Contribution to:- Workers’ Profits Participation Fund 22.1 94,805 51,976 - Workers’ Welfare Fund 22,412 19,751 - Central research fund 11,118 9,678

Auditors’ remuneration 30.1 2,158 2,607 Loss on disposal of property, plant and equipment 5.6 91 724 Exchange loss 17,354 34,207

147,938 118,943

30.1 Auditors’ remuneration

Audit fee- Annual audit 1,550 1,300 - Half year audit - 550 - Half yearly review 263 250

Fee in respect of special reports and certifications 215 343 Out of pocket expenses 130 164

2,158 2,607

140


2015 2014 Note ---- (Rupees in ‘000) ----

31 FINANCE COST

Bank charges 7,276 5,227 Interest on Workers’ Profits Participation Fund 22.1 3,999 3,816 Lease finance charges - 102 Mark-up on long term and running finances 178,891 204,257

190,166 213,402

32 INCOME TAX EXPENSE

Current - For the year 374,456 147,517 - For prior years - 55,981

374,456 203,498

Deferred tax (income)/expense 20.2 (12,205) 1,397 362,251 204,895

32.1 Charge for the year

Provisions for current taxation and deferred taxation have been made after considering the implications of section 169 of the Income Tax Ordinance, 2001. Income not covered under Final Tax Regime is provided at the normal basis using the applicable rate of 33% for the tax year 2015 (2014: 34% for the tax year 2014). While income covered under FTR and separate block are taxed accordingly.

Note 2015 2014 ---- (Rupees in ‘000) ----

32.2 Reconciliation of tax expense

Profit before income tax 1,767,664 958,120

Enacted tax rate 33% 34%

Tax on accounting profit at applicable tax rate 583,329 325,761 Tax effect of:

- permanent differences (187,036) (165,453)- temporary differences (21,131) (7,794)- applicability of lower tax rate on certain income (12,911) (3,600)- demand provided and raised during the year - 55,981

Tax expense charged on income 362,251 204,895

32.3 Current status of tax assessments

Assessments of the Company for the assessment years 2002-2003, tax years 2004, 2005, 2008, and 2012 are pending before various appellate forums in respect of issues related to certain disallowances.

A n n u a l R e p o r t 2 0 1 5 141


During the year ended June 30, 2014, an assessment order for the tax year 2012, dated March 10, 2014 under section 122(5A) of Income Tax Ordinance 2001 was passed by Additional Commissioner Inland Revenue (ACIR) against the Company, thereby raising a tax demand of Rs. 369.807 million in respect of certain disallowances. The Company had filed an appeal against the aforementioned order, however, no hearing has been fixed and no set aside order has been received by the Company till end of current year.

During the year ended June 30, 2014, an assessment order for the tax year 2008, dated October 31, 2013 under section 122(5A) of Income Tax Ordinance 2001 was passed by ACIR against the Company, thereby raising a tax demand amounting to Rs. 128.832 million against the Company in respect of certain disallowances. An appeal was filed by the Company against the aforementioned order, however, no hearing has been fixed and no set aside order has been received by the Company till end of current year.

During the year, an assessment order for the tax year 2013, dated April 30, 2015 under section 122(5A) of Income Tax Ordinance 2001 was passed by ACIR against the Company, thereby raising a tax demand amounting to Rs. 586.7 million against the Company in respect of certain disallowances. An appeal is filed by the Company against the aforementioned order.

The Company has good arguable cases on merits and as such there is no likelihood of unfavourable outcome or any potential loss on account of above assessment orders.

(Re-stated) 2015 2014

33 EARNINGS PER SHARE - Basic and Diluted

33.1 Basic earnings per share

Profit for the year (Rupees in thousands) 1,405,413 753,225

Weighted average number of shares in thousands (2014: Restated) 85,841 85,841

Earnings per share (Rupees) (2014: Restated) 16.37 8.77

33.2 Diluted earning per share

There is no dilution effect on the basic earning per share of the Company as the Company has no convertible dilutive potential ordinary shares outstanding on June 30, 2015, which would have effect on the basic EPS if the option to convert would have been exercised.

34 EMPLOYEE BENEFITS

a) Defined benefit plans

34.1 Gratuity scheme - unfunded

34.1.1 General description

The scheme provides for post employment benefits for all unionized employees who complete qualifying period of five years of service with the Company and are entitled to one months’ last drawn basic salary for each completed year of such service.

142


Annual provision is based on actuarial valuation. The valuation was carried out as at June 30, 2015 by M/s. Sidat Hyder Morshed Associates (Private) Limited, independent actuaries, using the projected unit credit method.

34.1.2 Principal actuarial assumptions

2015 2014 (percentage per annum)

Financial assumptions

- Estimated rate of increase in salary of the employees 10% 12.5%- Discount rate 10% 12.5%

Demographic assumptions

- Mortatilty SLIC 2001 - 2005

SLIC 2001 - 2005

Retirement age 60 years 60 years

2015 2014 Note ---- (Rupees in ‘000) ----

34.1.3 Movement in the present value of defined benefit obligation (DBO)

Present value of DBO at the beginning of the year (33,503) (27,821)Current service cost (1,528) (1,236)Interest cost (4,271) (3,230)

(5,799) (4,466)Benefits paid 1,294 1,809 Actuarial (gain) on obligation (1,802) (3,025)Present value of DBO at the end of the year 34.1.4 (39,810) (33,503)

34.1.4 Movement in the deficit recognized in the balance sheet

Deficit at the beginning of the year (33,503) (27,821)

Expense recognized in profit & loss account 34.1.5- current service cost (1,528) (1,236)- net interest (4,271) (3,230)

(5,799) (4,466)Remeasurement - recognized in other comprehensive income: Actuarial (loss)/gain arising due to change in:

- demographic assumptions - (unfavourable)/favourable - (717)- financial assumptions - (unfavourable)/favourable - - - experience adjustment - (losses)/gains (1,802) (2,308)

(1,802) (3,025)

Payment made on behalf of fund 1,294 1,809 Deficit at the end of the year 34.1.3 (39,810) (33,503)

A n n u a l R e p o r t 2 0 1 5 143


2015 2014 Note ---- (Rupees in ‘000) ----

34.1.5 Amount recognized as expense

Cost of sales 26 3,339 2,572 Selling and distribution expenses 27 1,904 1,465 Administrative expenses 28 556 429

5,799 4,466

34.1.6 The sensitivity of the defined benefit obligation to changes in the weighted average principal assumption is:

Impact on defined benefit obligation

Change in assumption

Increase in assumption

Decrease in assumption

Discount rate 1% (36,353) 43,769 Rate of increase in salary 1% 43,731 (36,324)

2015 2014 ---- (Rupees in ‘000) ----

b) Defined contribution plan

34.2 Employees Provident Fund (the Fund)

34.2.1 Fund position *

Size of the fund - Rupees in ‘000 469,593 251,971 Cost of investments made - Rupees in ‘000 432,332 246,348 Fair value of investments - Rupees in ‘000 432,332 246,348 Percentage of investments to total assets 92% 98%Number of members 1,477 1,304


34.2.2 Composition of the Fund *

Term finance certificates 1% 11% 4,994 28,041 Deposits with banks 2% 4% 9,000 9,000 Pakistan Investments Bonds (PIBs) 10% 10% 41,222 26,000 NIT units 16% 24% 67,449 59,585 Investment in mutual fund 8% 5% 36,388 12,345 Share of associated company 63% 46% 273,279 117,000

* These figures have been taken from unaudited financial statements of the Fund for the years ended June 30, 2014 and June 30, 2015.

34.2.3 The investments out of provident fund have been made in accordance with the provision of section 227 of the Companies Ordinance, 1984 and the rules formulated for this purpose.

144


2015 2014 Note ---- (Rupees in ‘000) ----

35 CASH GENERATED FROM OPERATIONS AFTER WORKING CAPITAL CHANGES

Profit before tax 1,767,664 958,120

Adjustments for non-cash items:

Depreciation 5.4 79,580 80,302 Gain on disposal of property, plant and equipment - net 5.6 (17,171) (64,606)Amortization 6 5,750 5,436 Financial charges excluding bank charges 31 182,890 208,175 Provision for staff gratuity (unfunded) 34.1.5 5,799 4,466 Net (increase) in working capital 35.1 (648,843) (180,500)

1,375,669 1,011,393

35.1 (Increase)/Decrease in working capital

Current assets Decrease in stores and spares - 1,182 (Increase) in stock-in-trade (211,575) (235,237)(Increase) in trade debts (720,182) (164,270)(Increase) in trade deposits and short term prepayments (15,005) (22,849)(Increase)/Decrease in other receivables (92,810) 24,998

(1,039,572) (396,176)Current liabilitiesIncrease in trade and other payables 390,729 215,676 Net (increase) in working capital (648,843) (180,500)

36 CASH AND CASH EQUIVALENTS

Cash and bank balances 16 122,821 20,621 Running finances under mark-up arrangements 21 (682,334) (795,882)

(559,513) (775,261)

37 SEGMENT INFORMATION

A segment is a distinguishable component of the Company that is engaged in business activities from which the Company earns revenues and incurs expenses and its results are regularly reviewed by the Company’s Chief Operating Decision Maker to make decision about resources to be allocated to the segment and assess its performance. Further, discrete financial information is available for each segment.

Based on internal management reporting structure and products produced and sold, the Company is organized into the following three operating segments:

- Pharma- Consumer- Investment property

A n n u a l R e p o r t 2 0 1 5 145


Management monitors the operating results of above mentioned segments separately for the purpose of making decisions about resources to be allocated and for assessing performance.

Segment revenue, segment result, costs, assets and liabilities for the year are as follows:

Pharma Consumer Investment property Total 2015 2014 2015 2014 2015 2014 2015 2014 --------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------

37.1 Segment result and performance

Segment revenue 6,651,207 5,315,462 931,263 756,361 31,113 - 7,613,583 6,071,823

Cost of sales (3,720,843) (3,153,450) (529,327) (441,192) - - (4,250,170) (3,594,642)Selling and distribution (1,667,576) (1,355,743) (93,563) (221,268) (68,746) - (1,829,885) (1,577,011)Administrative expenses (202,323) (177,103) - (25,651) - - (202,323) (202,754)

(5,590,742) (4,686,296) (622,890) (688,111) (68,746) - (6,282,378) (5,374,407)Segment result 1,060,465 629,166 308,373 68,250 (37,633) - 1,331,205 697,416

37.2 Unallocated income and expense Other income 774,563 593,049 Other expenses (147,938) (118,943)Financial cost (190,166) (213,402)Profit before taxation 1,767,664 958,120 Income tax expense (362,251) (204,895)Profit for the year 1,405,413 753,225

37.3 Segment assets and liabilities

Segment assets 135,906 169,185 33,977 25,280 2,491,318 2,393,277 2,661,201 2,587,742 Unallocated assets 5,317,437 3,683,660 Total assets 7,978,638 6,271,402

Segment liabilities - - - - 750,000 825,000 750,000 825,000 Unallocated liabilities 2,384,002 2,134,175 Total liabilities 3,134,002 2,959,175

37.4 Depreciation 42,065 69,863 12,565 10,439 24,950 - 79,580 80,302

37.5 Other non-cash expenses 5,750 5,436 - - - - 5,750 5,436

37.6 Addition in segment assets 51,031 78,376 15,243 11,711 723,388 203,879 789,662 293,966

37.7 Percentage for allocation 80% 90% 23% 10% -3% 0% 100% 100%

37.8 There were no inter-segment transactions during the year (2014: None).

2015 2014 37.9 Geographical segments Note ---- (Rupees in ‘000) ----

Net sales by region

Pakistan 7,131,025 5,757,973 Asia 231,176 140,128 Eastern Africa 10,341 2,606 South-Eastern Asia 55,571 32,530 Far East 166,950 138,586 Western Asia 18,520 -

37.9.1 7,613,583 6,071,823

The geographical segment has been categorized using United Nation’s composition of macro geographical (continental) regions.

146


37.9.1 The Company has presented the net sales amounts for the current and comparative prior year.

37.10 The Company has earned major revenue from one of the customer, which amounts to Rs. 6.61 billion (2014: Rs. 5.11 billion) out of the total revenue.

38 REMUNERATION OF THE CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVES

2015 2014 Chief

Executive Officer

Directors Executives*Chief

Executive Officer

Directors Executives*

(Rupees in ‘000)

Managerial remuneration 4,577 19,571 94,798 3,840 10,197 107,852

Annual bonus 710 1,112 13,467 570 1,994 16,754

Retirement benefits

- Provident fund 458 1,957 9,480 384 1,020 10,785

Perquisites

- Rent 2,060 8,807 42,659 1,728 4,589 48,533

- Utilities 458 1,957 9,480 384 1,020 10,785

- Telephone - - 156 - - 174

- Entertainment - - 271 - - 297

- Car maintenance 201 472 4,116 179 606 3,368 8,464 33,876 174,427 7,085 19,426 198,548

Number of persons 1 3 90 1 3 92

38.1 In addition to the above, the chief executive officer and some of the executives have been provided with free use of the Company maintained cars. Further, medical expenses are reimbursed in accordance with the Company’s policies.

38.2 During the year, the Company has paid to five non-executive directors (2014: five) an aggregate amount of Rs. 182,000 (2014: Rs. 120,000) as fee for attending board meetings.

* Executive means an employee other than chief executive officer and director, whose basic salary exceeds five hundred thousand rupees in a financial year.

39 TRANSACTIONS WITH RELATED PARTIES

The related parties comprises International Brands (Private) Limited (holding company), IBL HealthCare Limited (subsidiary company), associated companies, related group companies, key management personnel, compensation to key management personnel, retirement benefit plan and close family members.

A n n u a l R e p o r t 2 0 1 5 147


39.1 Aggregate transactions and balances with related parties and associated undertakings which are not disclosed in respective notes are as follows:




Directors Key


Associates/ Group



Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

39.1.1 Transactions

(i) IBL Operations (Private) Limited - associated company (refer note 39.2 and 39.3)

Sales 6,608,552 - - 5,095,810 - - Sales returned 66,261 - - 122,912 - -

Expenses claimed by the associated company

Carriage and duties 34,106 - - 21,200 - - Staff salaries and benefits 1,678 - - 4,287 - - Discounts 168,691 - - 101,222 - - Warehouse rent 3,731 - - 3,874 - - Corporate services charged 39,600 - - 7,200 - - Sales promotion expenses 7,206 - - 66,632 - - IT Services 2,802 - - 6,600 - -

Expenses claimed by the Company Staff salaries and other expenses 1,278 - - 5,465 - - Royalty and price difference claims 19,387 - - - - -

(ii) International Franchises (Private) Limited - associated companySales 325 - - 677 - - Sales returned 69 Rent, utility and other income 8,740 - - 2,749 - - Staff salaries and benefits - - - 1,123 - - Purchase of Promotional Items 201 - - 808 - -

Expenses claimed by the Company Utilities expenses (Building center) 569 - - - - -

(iii) United Distributors Pakistan Limited (UDPL) - associated company

Purchase of vehicles 2,010 - - - - - Payment under group tax relief 11,558 - - - - -

Expenses claimed by the Company

Vehicle hiring/ Insurance 10 - - - - - Warehouse rent & expenses 686 - - 625 - - Staff salaries and benefits - - - 122 - -

148


Associates/ Group



Directors Key


Associates/ Group



Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

(iv) HABITT - associate

Sales 6,907 - - - - - Sales returned 580 - - - - - Rent income 27,875 - - - - - Purchase of promotional items from Habitt 558 - - 775 - -

(v) IBL HealthCare Limited - subsidiary company

Expenses claimed by the Company

Salaries, wages and benefits - - - 1,139 - - Warehouse expenses 90 - - - - - Purchases of promotional items 320 - - 620 - - Vehicle Hiring - - - 1,926 - -

(vi) The Citizens Foundation - associate (refer note 39.4)

Donations - - - 15,000 - -

(vii) Arshad Shahid Abdulla (Private) Limited - associated company

Architect fee 2,980 - - 1,260 - -

(viii) Shahid Abdulla

Office and factories renovation 373 - - - - -

(ix) Multinet Pakistan (Private) Limited - associated company

Internet services 452 - - 760 - -

(x) United Brands Limited - associated company

Sales 71,755 - - 84,927 - - Sales returns 461 - - - - -

Expenses claimed by United Brands Limited

Discounts 944 - - 1,563 - - Purchase of promotional items 777 - - 585 - -

A n n u a l R e p o r t 2 0 1 5 149





Directors Key


Associates/ Group



Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

(xi) Searle Pharmaceuticals (Private) Limited - subsidiary company

Purchases 966,858 - - 657,991 - -

(xii) Searle Laboratories (Private) Limited - subsidiary company

Purchases 5,978 - - 17,771 - -

Professional fee - 24,500 - - - -

39.1.2 Balances

(i) Loans and advances

At beginning of the year - - 3,604 - - 3,458 Given during the year - - 7,259 - - 4,043 Repaid during the year - - (3,859) - - (3,897)At the end of the year - - 7,004 - - 3,604

(ii) Trade debts - associated company (refer note 12)

At beginning of the year 1,252,643 - - 1,071,559 - - Addition during the year 6,666,488 - - 5,119,950 - - Repaid during the year (6,063,760) - - (4,938,866) - - At the end of the year 1,855,371 - - 1,252,643 - -

(iii) Other receivables - associates (refer note 15)


150





Directors Key


Associates/ Group



Directors Key


------------------------------- (Rupees in ‘000) -------------------------------

(iv) Creditors - subsidiary company (refer note 22)


39.2 In pursuance of scheme of arrangement and court order dated May 2011, with effect from July 1, 2011 all assets (except for retained assets), liabilities and operation division of International Brands (Private) Limited (the holding company) were transferred to IBL Operations (Private) Limited (associated company).

39.3 Sales to IBL Operations (Private) Limited (associated company) are made at ex-factory price i.e. trade prices less distributor’s margin of 10% and 12% (2014: 10% and 12%). In addition, the amounts of communication, utilities, salaries and wages and carriage and duties are also being reimbursed.

39.4 The Chairman of the Company is on the board of directors of the donee. The address of the donee is Plot No. 20, Sector - 14, Near Brookes Roundabout, Korangi Industrial Area, Karachi.

40 PLANT CAPACITIES AND ACTUAL PRODUCTION

The capacity and production of the Company’s plants are indeterminable as these are multi-product and involve varying processes of manufacture.

41 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

Financial risk management

The board of directors of the Company has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has exposure to the following risks from its use of financial instruments:

- Credit risk - Liquidity risk - Market risk

A n n u a l R e p o r t 2 0 1 5 151


41.1 Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss, without taking into account the fair value of any collateral. Concentration of credit risk arises when a number of counterparties are engaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economics, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.

Credit risk of the Company arises principally from the trade debts, loans and advances, trade deposits and other receivables. The carrying amount of financial assets represents the maximum credit exposure. To reduce the exposure to credit risk, the Company has developed a formal approval process whereby credit limits are applied to its customers. The management continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery.

The maximum exposure to credit risk at the reporting date is as follows: 2015 2014

Note ---- (Rupees in ‘000) ----

Loans and advances 9 & 13 50,479 44,720 Long term deposit 10 1,598 1,598 Trade debts, excluding secured debtors 12 2,122,371 1,424,731 Trade deposits 14 40,360 37,924 Other receivables 15 285,648 202,616

2,500,456 1,711,589

Concentration of credit risk

The Company’s major sales are with IBL Operations (Private) Limited, which is a concentration and a credit risk. However, the Company has established policies and procedures for timely recovery of trade debts. With respect to parties other than affiliates, the Company mitigates its exposure and credit risk by applying credit limits to its customers.

Out of the total financial assets of Rs. 2.68 billion (2014: Rs. 1.77 billion), financial assets which are subject to credit risk amount to Rs. 2.50 billion (2014: Rs. 1.71 billion). Moreover, financial assets amounting to Rs. 2.14 billion (2014: Rs. 1.46 billion) consist of receivables from the Company’s affiliates and cash and bank balances.

41.2 Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company would be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The following are the contractual maturities of financial assets and financial liabilities:

152


2015

Effective interest

rate



Maturity after one

yearSubtotal Maturity up

to one year

Maturity after one

yearSubtotal

Note % -------------------------------------------- (Rupees in ‘000) --------------------------------------------

Financial assets

Loans and advances 9 & 13 - - - 50,033 446 50,479 50,479 Long term deposits 10 - - - - 1,598 1,598 1,598 Trade debts 12 - - - 2,182,838 - 2,182,838 2,182,838 Trade deposits 14 - - - 40,360 - 40,360 40,360 Other receivables 15 - - - 285,648 - 285,648 285,648 Cash and bank balances 16 6.5 9 - 9 122,812 - 122,812 122,821

9 - 9 2,681,691 2,044 2,683,735 2,683,744 Financial liabilities

Long-term finance 19 KIBOR +0.9 (107,143) (642,857) (750,000) - - - (750,000)

Trade and other payables 22 - - - (1,455,368) - (1,455,368) (1,455,368)Accrued mark-up 23 - - - (14,657) - (14,657) (14,657)Short-term finances 21 9.5 to 12.42 (682,334) - (682,334) - - - (682,334)

(789,477) (642,857) (1,432,334) (1,470,025) - (1,470,025) (2,902,359)On balance sheet date gap (789,468) (642,857) (1,432,325) 1,211,666 2,044 1,213,710 (218,615)

2014

Effective interest

rate



Maturity after one

yearSubtotal Maturity up

to one year

Maturity after one

yearSubtotal

Note % -------------------------------------------- (Rupees in ‘000) --------------------------------------------

Financial assets

Loans and advances 9 & 13 - - - 44,218 502 44,720 44,720 Deposits 10 - - - - 1,598 1,598 1,598 Trade debts 12 - - - 1,462,656 - 1,462,656 1,462,656 Trade deposits 14 - - - 37,924 - 37,924 37,924 Other receivables 15 - - - 202,616 - 202,616 202,616 Cash and bank balances 16 6 9 - 9 20,612 - 20,612 20,621

9 - 9 1,768,026 2,100 1,770,126 1,770,135

Financial liabilities

Long-term finance 19 KIBOR +2.5 (150,000) (675,000) (825,000) - - - (825,000)

Trade and other payables 22 - - - (1,076,014) - (1,076,014) (1,076,014)Accrued mark-up 23 - - - (21,528) - (21,528) (21,528)Short-term finances 21 10.53 to

12.39 (795,882) - (795,882) - - - (795,882) (945,882) (675,000) (1,620,882) (1,097,542) - (1,097,542) (2,718,424)

On balance sheet date gap (945,873) (675,000) (1,620,873) 670,484 2,100 672,584 (948,289)

A n n u a l R e p o r t 2 0 1 5 153


41.3 Market risk

Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to a change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of securities and liquidity in the market. The Company is exposed to currency risk and interest rate risk only.

41.3.1 Currency risk

Currency risk is the risk that the value of financial asset or a liability will fluctuate due to a change in foreign exchange rates. It arises mainly where receivables and payables exist due to transactions entered into foreign currencies.

The Company is exposed to currency risk on purchases that are entered in a currency other than Pak Rupees. Payable exposed to foreign currency risk have been included in creditors/bills payable, which at year-end are Rs. 264 million (2014: Rs. 102 million) and foreign currency receivables included in trade debtors are Rs. 60.46 million (2014: Rs. 57.7 million). The Company earned exchange gain of Rs. 13.4 million (2014: Rs. 26.3 million) and suffered exchange loss of Rs. 17.3 million (2014: Rs. 34.2 million) during the year.

41.3.2 Interest rate risk

Interest rate risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Majority of the interest rate exposure arises under long term finance and short term finance. Further there has been no variable rate instrument at both the current and comparative year-end. At the balance sheet date the interest rate profile of the Company’s mark-up bearing financial instruments is as follows:

2015 2014 Note ---- (Rupees in ‘000) ----

Variable rate instruments

Financial liabilities - Long term finance 19 (750,000) (825,000)- Short term finance 21 (682,334) (795,882)

(1,432,334) (1,620,882)

Cash flow sensitivity for variable rate instruments

A change of 100 basis points (bp) in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amount shown below. This analysis assumes that all other variables, in particular foreign currency rates remain constant. The analysis is performed on the same basis for 2014.

154


Profit and loss Equity100 bp increase

100 bp decrease

100 bp increase

100 bp decrease

------------------- (Rupees in ‘000) -------------------

As at June 30, 2015Cash flow sensitivity - variable rate instruments 1,789 (1,789) 1,789 (1,789)

As at June 30, 2014 Cash flow sensitivity - variable rate instruments 2,044 (2,044) 2,044 (2,044)

42 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the amount at which an asset could be exchanged or liability settled between knowledgeable willing parties in an arm’s length transaction. The Company prepares its unconsolidated financial statements under the historical cost convention and where applicable at fair value and amortized cost. Estimated fair value of all financial instruments are not significantly different from their carrying values at the year end.

2015 2014 Note ---- (Rupees in ‘000) ----

43 FINANCIAL INSTRUMENTS BY CATEGORY

43.1 Financial liabilities

Financial liabilities measured at amortized costLong-term finances 19 (750,000) (825,000)Trade and other payables 22 (1,455,368) (1,076,014)Short-term finances 21 (682,334) (795,882)

Financial liabilities measured at fair value through profit or lossAccrued mark-up 23 (14,657) (35,952)

(2,902,359) (2,732,848)43.2 Financial assets

Loans and receivablesLoans and advances 9 & 13 50,479 44,720 Long term deposit 10 1,598 1,598 Trade debts 12 2,182,838 1,462,656 Trade deposits 14 40,360 37,924 Other receivables 15 285,648 202,616 Cash and bank balances 16 122,821 20,621

2,683,744 1,770,135

On balance sheet gap (218,615) (962,713)

A n n u a l R e p o r t 2 0 1 5 155


44 NUMBER OF EMPLOYEES 2015 2014

Number of employees as at the year end 1,468 1,399

Average number of employees during the year 1,381 1,447

45 DATE OF AUTHORIZATION FOR ISSUE

These unconsolidated financial statements are authorized for issue by the Board of Directors on September 30, 2015.

2015 2014 ---- (Rupees in ‘000) ----

45.1 Event after balance sheet date

The Board of Directors of the Company in the meeting held on September 30, 2015 has approved the following appropriation:

- Cash dividend - Rs. 2 (2014: Nil) per share of Rs. 10 each 171,681 -

- Issue of bonus shares 20% (2014: 40%) in the ratio of 20 (2014: 40) shares for every 100 shares held 171,681 245,259

These would be recognized in the Company’s unconsolidated financial statements in the year in which such dividend and distribution are approved.

In addition to the above, the Board of Directors of the Company has also approved 10% right issue at a premium of Rs. 190 per share.



156

Pattern of Shareholding As at June 30, 2015

No. of Shareholders Shareholdings’Slab Total Shares Held

2073 1 to 100 59,4871553 101 to 500 439,999677 501 to 1000 531,601

1387 1001 to 5000 3,184,900247 5001 to 10000 1,842,16983 10001 to 15000 1,002,36054 15001 to 20000 951,87924 20001 to 25000 545,10821 25001 to 30000 577,0976 30001 to 35000 201,275

14 35001 to 40000 528,4755 40001 to 45000 209,187

10 45001 to 50000 480,3097 50001 to 55000 371,3628 55001 to 60000 452,2912 60001 to 65000 127,6004 65001 to 70000 268,9526 70001 to 75000 441,7401 75001 to 80000 80,0001 80001 to 85000 84,5732 85001 to 90000 177,7602 90001 to 95000 187,6484 95001 to 100000 393,2623 100001 to 105000 313,3001 105001 to 110000 105,9001 110001 to 115000 111,7001 115001 to 120000 234,1991 120001 to 125000 125,0001 125001 to 130000 129,6821 130001 to 135000 133,0002 135001 to 140000 279,9002 145001 to 150000 295,5772 155001 to 160000 317,7001 160001 to 165000 163,8003 165001 to 170000 497,7231 175001 to 180000 177,2122 180001 to 185000 362,9881 200001 to 205000 203,0002 210001 to 215000 427,1361 215001 to 220000 215,7541 220001 to 225000 220,0633 225001 to 230000 680,2701 235001 to 240000 236,3001 240001 to 245000 240,6561 245001 to 250000 245,4002 260001 to 265000 522,1101 335001 to 340000 335,1552 345001 to 350000 697,4891 405001 to 410000 408,8001 410001 to 415000 414,0001 420001 to 425000 421,0001 540001 to 545000 544,2451 695001 to 700000 698,0662 720001 to 725000 1,443,0781 795001 to 800000 797,1441 995001 to 1000000 1,000,0001 1005001 to 1010000 1,009,0721 1040001 to 1045000 1,044,3301 1250001 to 1255000 1,252,8001 1450001 to 1455000 1,453,3201 1515001 to 1520000 1,518,3361 1560001 to 1565000 1,564,9641 2040001 to 2045000 2,041,7001 2530001 to 2535000 2,531,1081 46610001 to 47500000 47,288,734

6248 85,840,745

A n n u a l R e p o r t 2 0 1 5 157


Categories of Shareholders Shareholders Shares Held Percentage

Directors and their spouse(s) and minor childrenRashid Abdulla 2 7,257 0.01 Shahid Abdulla 2 145,880 0.17 Husain Lawai 1 2,085 0.00 Syed Nadeem Ahmed 1 1,585 0.00 Zubair Razzak Palwala 1 1,657 0.00 Asad Abdulla 1 1,381 0.00 Ayaz Abdulla 1 8,288 0.01 Adnan Asdar Ali 1 1,381 0.00 Faiza Naeem 1 690 0.00 Shakila Rashid 3 220,382 0.26

Associated Companies, undertakings and related partiesInternational Brands Limited 3 47,299,283 55.10Trustee Searle Pakistan Limited Provident Fund 1 544,245 0.63

Executives - - -

Public Sector Companies and Corporations 5 1,781,122 2.07

Banks, development finance institutions, non-banking finance companies, insurance companies, takaful, modarabas and pension funds 32 4,508,313 5.25

Mutual FundsFIRST CAPITAL MUTUAL FUND LTD. 1 23,433 0.03 BSJS BALANCED FUND LTD. 1 99 0.00 CDC - TRUSTEE MEEZAN BALANCED FUND 1 104,800 0.12 CDC - TRUSTEE AKD INDEX TRACKER FUND 1 8,194 0.01 CDC - TRUSTEE AL MEEZAN MUTUAL FUND 1 163,800 0.19 CDC - TRUSTEE MEEZAN ISLAMIC FUND 1 1,252,800 1.46 CDC - TRUSTEE UBL STOCK ADVANTAGE FUND 1 180,688 0.21 CDC - TRUSTEE AL-AMEEN SHARIAH STOCK FUND 1 721,078 0.84 CDC - TRUSTEE NAFA ISLAMIC ASSET ALLOCATION FUND 1 65,100 0.08 CDC - TRUSTEE ALFALAH GHP STOCK FUND 1 7,546 0.01 CDC - TRUSTEE ALFALAH GHP ALPHA FUND 1 700 0.00 CDC - TRUSTEE ABL STOCK FUND 1 17,404 0.02 CDC - TRUSTEE LAKSON EQUITY FUND 1 182,300 0.21 CDC - TRUSTEE HBL PF EQUITY SUB FUND 1 6,600 0.01 CDC - TRUSTEE KSE MEEZAN INDEX FUND 1 56,500 0.07 MCBFSL - TRUSTEE PAK OMAN ISLAMIC ASSET ALLOCATION FUND 1 10,000 0.01 MCBFSL - TRUSTEE ABL ISLAMIC STOCK FUND 1 180 0.00 CDC - TRUSTEE PIML STRATEGIC MULTI ASSET FUND 1 10,000 0.01 CDC - TRUSTEE FIRST CAPITAL MUTUAL FUND 1 4,116 0.00 CDC - TRUSTEE PIML ISLAMIC EQUITY FUND 1 9,000 0.01 CDC-TRUSTEE AL-AMEEN ISLAMIC RET. SAV. FUND-EQUITY SUB FUND 1 97,762 0.11 CDC - TRUSTEE UBL RETIREMENT SAVINGS FUND - EQUITY SUB FUND 1 89,910 0.10 CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST 1 2,531,108 2.95 CDC - TRUSTEE NAFA ISLAMIC STOCK FUND 1 37,000 0.04 CDC - TRUSTEE PIML VALUE EQUITY FUND 1 10,000 0.01 CDC - TRUSTEE FIRST HABIB INCOME FUND - MT 1 2,500 0.00 CDC - TRUSTEE NIT ISLAMIC EQUITY FUND 1 95,500 0.11

General Publica. Local 6014 12,989,191 15.13 b. Foreign 4 1,551,796 1.81

Foreign Companies 40 9,253,507 10.78 Others 108 2,513,021 2.93 Totals 6248 85,840,745 100.00

Share holders holding 5% or more Shares Held Percentage International Brands Limited 47,299,283 55.10

158

S.No. Folio # Name of shareholder Number of shares Per %

Directors and their spouse(s) and minor children1 1 Rashid Abdulla 3,323 0.00 2 03277-11384 Rashid Abdulla 3,934 0.00 3 3 Shahid Abdulla 5,980 0.01 4 00539-17265 Shahid Abdulla 139,900 0.16 5 5856 Husain Lawai 2,085 0.00 6 13667 Syed Nadeem Ahmed 1,585 0.00 7 02113-1037 Zubair Razzak Palwala 1,657 0.00 8 03277-20909 Asad Abdulla 1,381 0.00 9 03277-21385 Ayaz Abdulla 8,288 0.01

10 02113-3389 Adnan Asdar Ali 1,381 0.00 11 02113-3157 Faiza Naeem 690 0.00 12 00539-16424 Shakila Rashid 4,560 0.01 13 02113-1748 Shakila Rashid 3,000 0.00 14 03277-12714 Shakila Rashid 212,822 0.25

14 390,586 0.46

Associated companies, undertakings and related parties1 03277-2937 International Brands Limited 47,288,734 55.092 8 International Brands Limited 740 0.00 3 9 International Brands Limited 9,809 0.01 4 02113-3439 Trustee Searle Pakistan Limited Provident Fund 544,245 0.63

4 47,843,528 55.74

ExecutiveNIL

- -

Public sector companies and corporations1 10 National Bank of Pakistan Trustee Wing 138 0.00 2 11757 National Bank of Pakistan Trustee Wing 138 0.00 3 03889-28 National Bank of Pakistan 1,400 0.00 4 03889-44 National Bank of Pakistan 261,110 0.30 5 02683-23 State Life Insurance Corporation of Pakistan 1,518,336 1.77

5 1,781,122 2.07

Banks, development finance institutions, non-banking finance companies, insurance companies, takaful, modarabas and pension funds

1 11293 ATLAS INVESTMENT BANK LTD. 125 0.00 2 11306 ASSET INVESTMENT BANK LIMITED 21 0.00 3 12392 CRESCENT INVESTMENT BANK LTD 1,770 0.00 4 02295-39 FAYSAL BANK LIMITED 70,200 0.08 5 02675-16 INDUS BANK LIMITED 23,121 0.03 6 02832-32 MEEZAN BANK LIMITED 105,900 0.12 7 03079-83 SONERI BANK LIMITED 2,898 0.00 8 03798-52 THE BANK OF KHYBER 50,000 0.06 9 06239-23 FIRST DAWOOD INVESTMENT BANK LIMITED 2,000 0.00

10 11940-4410 ESCORTS INVESTMENT BANK LIMITED 345 0.00 11 13995-23 SONERI BANK LIMITED - MT 1,300 0.00 12 14506-11 NIB BANK LIMITED - MT 64,600 0.08 13 12444 BUSINESS & INDUSTRIAL INSURANCE COMPANY 57 0.00 14 03277-2184 EFU GENERAL INSURANCE LIMITED 1,564,964 1.82 15 03277-2538 EFU LIFE ASSURANCE LTD 335,155 0.39 16 03277-9371 JUBILEE LIFE INSURANCE COMPANY LIMITED 1,453,320 1.69 17 03277-15009 CENTURY INSURANCE COMPANY LTD. 5,400 0.01 18 03277-69871 ASIA CARE HEALTH & LIFE INSURANCE CO. LTD. 1,000 0.00 20 12406 FIRST UDL MODARABA 258 0.00 21 12410 FIRST UDL MODARABA 72,305 0.08 22 02113-21 FIRST EQUITY MODARABA 22,500 0.03

A n n u a l R e p o r t 2 0 1 5 159


23 02113-708 First UDL Modaraba 50,000 0.06 24 03277-1651 FIRST UDL MODARABA 226,200 0.26 25 03277-3367 FIRST IBL MODARABA 7,341 0.01 26 11320-25 B.R.R. GUARDIAN MODARABA 38,660 0.05 27 07450-4077 CRESCENT STANDARD MODARABA 17,500 0.02 28 03277-78335 TRUSTEE NATIONAL BANK OF PAKISTAN

EMPLOYEES PENSION FUND 228,370 0.27

29 03277-81682 TRUSTEES OF CRESENT STEEL & ALLIED PRODUCTS LTD-PENSION FUND

175 0.00

30 14431-29 CDC - TRUSTEE NAFA ISLAMIC PENSION FUND EQUITY ACCOUNT

7,372 0.01

31 10397-29 CDC - TRUSTEE MEEZAN TAHAFFUZ PENSION FUND - EQUITY SUB FUND

133,000 0.15

32 14415-21 CDC - TRUSTEE NAFA PENSION FUND EQUITY SUB-FUND ACCOUNT

10,356 0.01

33 03277-72917 DAWOOD FAMILY TAKAFUL LIMITED 12,100 0.01 32 4,508,313 5.25

Mutual Funds1 12391 FIRST CAPITAL MUTUAL FUND LTD. 23,433 0.03 2 12676 BSJS BALANCED FUND LTD. 99 0.00 3 05991-23 CDC - TRUSTEE MEEZAN BALANCED FUND 104,800 0.12 4 06411-21 CDC - TRUSTEE AKD INDEX TRACKER FUND 8,194 0.01 5 07062-23 CDC - TRUSTEE AL MEEZAN MUTUAL FUND 163,800 0.19 6 07070-22 CDC - TRUSTEE MEEZAN ISLAMIC FUND 1,252,800 1.46 7 07377-26 CDC - TRUSTEE UBL STOCK ADVANTAGE FUND 180,688 0.21 8 09456-24 CDC - TRUSTEE AL-AMEEN SHARIAH STOCK FUND 721,078 0.84 9 10801-27 CDC - TRUSTEE NAFA ISLAMIC ASSET

ALLOCATION FUND 65,100 0.08

10 11809-26 CDC - TRUSTEE ALFALAH GHP STOCK FUND 7,546 0.01 11 11924-22 CDC - TRUSTEE ALFALAH GHP ALPHA FUND 700 0.00 12 12195-21 CDC - TRUSTEE ABL STOCK FUND 17,404 0.02 13 12336-23 CDC - TRUSTEE LAKSON EQUITY FUND 182,300 0.21 14 13714-25 CDC - TRUSTEE HBL PF EQUITY SUB FUND 6,600 0.01 15 13946-28 CDC - TRUSTEE KSE MEEZAN INDEX FUND 56,500 0.07 16 13961-26 MCBFSL - TRUSTEE PAK OMAN ISLAMIC ASSET

ALLOCATION FUND 10,000 0.01

17 14373-27 MCBFSL - TRUSTEE ABL ISLAMIC STOCK FUND 180 0.00 18 14480-24 CDC - TRUSTEE PIML STRATEGIC MULTI ASSET FUND 10,000 0.01 19 14514-28 CDC - TRUSTEE FIRST CAPITAL MUTUAL FUND 4,116 0.00 20 14761-29 CDC - TRUSTEE PIML ISLAMIC EQUITY FUND 9,000 0.01 21 14845-29 CDC-TRUSTEE AL-AMEEN ISLAMIC RET. SAV. FUND-

EQUITY SUB FUND 97,762 0.11

22 14860-27 CDC - TRUSTEE UBL RETIREMENT SAVINGS FUND - EQUITY SUB FUND

89,910 0.10

23 14902-21 CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST

2,531,108 2.95

24 15974-23 CDC - TRUSTEE NAFA ISLAMIC STOCK FUND 37,000 0.04 25 16030-25 CDC - TRUSTEE PIML VALUE EQUITY FUND 10,000 0.01 26 16048-24 CDC - TRUSTEE FIRST HABIB INCOME FUND - MT 2,500 0.00 27 16139-23 CDC - TRUSTEE NIT ISLAMIC EQUITY FUND 95,500 0.11

27 5,688,118 6.63

General Public Foreign4 1,551,796 1.81

Foreign Companies40 9,253,507 10.78

Others108 2,513,021 2.93

Total 6248 85,840,745 100.00 General Public Local 6014 12,989,191 15.13

6014 12,989,191 15.13

160

THE SEARLE COMPANY LIMITED I / We _____________________ son / daughter / wife / husband of _____________________, shareholder of The Searle Company Limited, holding __________ ordinary shares hereby appoint _____________________ who is my _______________ [state relationship ( if any) with the proxy; required by Government regulations] and the son / daughter / wife / husband of ________________ , (holding __________ ordinary shares in the Company under Folio No. __________) [required by Government] as my / our proxy, to attend and vote for me / us and on my / our behalf at the Annual General Meeting of the Company to be held on October 29, 2015 and / or any adjournment thereof.

Signed this______day of______2015.

Witness:

1. _____________________

2. _____________________

Note:

1. The member is requested:

I) ToaffixrevenuestampofRs.5/-attheplaceindicatedabove. II) To sign across the revenue stamp in the same style of signature as is registered with the

Company. III) To write down their Folio Number.

iv) Attach an attested photocopy of their valid Computerized National Identity Card/Passport/Board Resolution and the copy of CNIC of the proxy, with this proxy form before submission.

2. Inordertobevalid,thisproxymustbereceivedattheregisteredofficeoftheCompanyat least48hoursbeforethetimefixedfortheMeeting,dulycompletedinallrespects.

3. CDC Shareholders or their proxies should bring their original Computerized National Identity Card or Passport along with the Participant’s ID Number and their Account Number to facilitatetheiridentification.DetailedprocedureisgivenintheNotestotheNoticeofAGM.

Signature of Member(s)Shareholders Folio No. _______ and / or CDC Participation I.D. No. _______ and

Sub-Account No. _______

Proxy Form

Rs. 5/-Revenue Stamp

The Company Secretary


First Floor, N.I.C. BuildingAbbasi Shaheed Road,Karachi-75530

162

Consent to receive annual financial statements electronically

The ManagerShare DepartmentCentral Depository Company of PakistanShare Registrar – THE SEARLE COMPANY LIMITED99-B, Block B, S.M.C.H.S.Main Shahrah-e-FaisalKarachi

CONSENT TO RECEIVE ANNUAL FINANCIAL STATEMENTS ELECTRONICALLY

I/we ______________________ of _____________________ being a member of the Searle Company Limited holder of ______________ ordinary shares under folio # ___________ opt for receiving financial statements of your Company through email instead of receiving by post.

My current email address is as under: _____________________________________

Regards,

_________________Signature of Member

A n n u a l R e p o r t 2 0 1 5 163

The ManagerShare DepartmentCentral Depository Company of PakistanShare Registrar – THE SEARLE COMPANY LIMITED99-B, Block B, S.M.C.H.S.Main Shahrah-e-FaisalKarachi

164

THE SEARLE COMPANY LIMITED

1st Floor, N.I.C Building, Abbasi Shaheed Road, Karachi-75530URL: www.searlecompany.com

Annual Report 2015 - SEARLE Companysearlecompany.com/.../themes/searle/downloads/Annual-Report-2015.… · Annual Report 2015 Research in the ... consolidated financial statements

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